One of the most well-worn and yet incorrect analogies circulating – especially around electioneering times – is that a government budget can be managed just like a household budget. After all, we cannot afford to spend beyond our means, can we? Is not balancing the family chequebook a good idea? Unfortunately, this folksy homespun analogy is not only simplistic, but also misleading and contributes to the infantilisation of political debate in the Anglosphere nations.
In response to a query by a journalist, Australian Labour Party leader Anthony Albanese could not recall the official unemployment rate. This putative ‘gaffe’ by an aspiring prime ministerial candidate revealed the infantile character of what passes for journalism, rather than any shortcoming on Albanese’s part. This ridiculous gotcha reporting only contributes to the deterioration of political debate, and increases the apathy of the electorate towards the political process.
Australian Greens leader Adam Bandt, when asked a similar gotcha-type question, hit back with an eloquent response – let’s focus on the policies and ideas, let’s discuss how to improve the welfare of the society. If you want the latest statistics – google it.
Greg Jericho, economics columnist for the Guardian, wrote that it is more important to know the impact of your policies than recalling statistics offhand. Indeed, Jericho wrote that he frequently accesses statistics from Australian government websites, when writing his columns. Rather than rattling off stats from the top of his head, he verifies his articles through research.
The household comparison has been skilfully deployed to facilitate an austerity agenda. A household budget impacts only the occupants of that household – a government’s budget decisions impact millions of people and affects the direction of a national economy. Our economic reporting, and the way we think about government spending, has been gradually colonised by the financial/corporate sector. The effect of that is to obscure the fact that wealth is created by labour power, combined with capital spending and investment, to generate a healthy economy.
A government can levy taxes, implement and regulate a currency, invest in long-term infrastructure projects, and determine the standards of measurement used to impose a uniform currency – the dollar in Australia’s case. In fact, in the 1960s, the Australian ruling class changed currencies from the pound (tied to the English currency) to the Australian dollar – a measure no household can ever achieve. Changing currency is a tectonic shift in the nature and operation of a national economy.
The alleged suffering of multinational corporations under an uncompetitive and uncompromising tax structure is a conservative myth. In Australia, there are 722 major corporations, including 199 which reported more than one billion dollars in profits for fiscal year 2016-17 – and paid no taxes. If government deficit was such a series problem, this avoidance of corporate taxes should be urgently addressed.
The failure by the Australian government to establish a federal Independent Commission Against Corruption (ICAC) may not seem like an economic issue. However, let’s consider the following – how much government money is lost or siphoned off due to corruption? Plugging that particular hole in the budget would certainly contribute significantly to reducing government debt.
The seeming inability of the federal government to investigate just how many billions of dollars transnational corporations have stashed away in offshore tax havens indicates a lack of political will. Reclaiming such money offers an opportunity to not only recoup truckloads of lost money, but also help compensate for the purportedly serious government deficit. These kind of political decisions are not in the interest of the financial/corporate elite; lectures about fiscal responsibility are reserved for public spending on health care and education.
The household-budget metaphor, deployed as a rhetorical device, is used to attack the suggestion of public spending, particularly as it relates to health care services, welfare, government schools, public transport and the like. Of course no government has infinite amounts of money. However, the way we think about deficit spending is influenced by those who intend to dismantle the public sector and hand over more money to private enterprise.
Former Australian prime minister and lodestar of today’s conservatives, Robert Menzies, ran budget deficits and invested government money in public infrastructure. Government spending as a share of GDP actually increased under Menzies – from 19.4% to 24.5%. No-one denounced his government as irresponsible or reckless. Menzies also kept watch on inflationary pressures, all the while maintaining a long term vision for the economy.
While noting the use of GDP growth as a metric of economic success, let’s suggest another metric to watch – lifting people out of poverty. How many millions, or hundreds, of previously unemployed and/or poor were lifted out of poverty by government policies? Surely improving the quality of life for its citizens is a major task of governments. Why don’t we report on poverty alleviation like we do on a daily basis on the stock market?
It is possible to focus on nation-building, constructing infrastructure vital to building a cohesive society, and keep an eye on deficits. This obsessive-compulsive disorder we have with reducing government deficit serves to blur our focus on economic activities that contribute to nation prosperity. Let’s have a national conversation about economic policies without recourse to trivial and infantile analogies which actually do harm to our political debate.