“Free Beer Tomorrow”: Labor’s Budget Strategy

7 Mar

Senator Joyce continues to make good on his pledge to keep warning about rising government debt (excerpt from the Canberra Times, link to come):

As a nation we are only $35 billion away until we max out the nation’s credit card again. Wayne Swan promised that we would not get close to our $300 billion debt limit. Indeed, he said that at the end of each year we would be below $250 billion. We now know he won’t keep that promise, just like he has not kept many others.

Prior to the $300 billion limit, we had a $250 billion limit that we were never going to exceed. Before that, our debt was not going to go beyond the “temporary limit” for the “GFC” of $200 billion. That level was an increase from the initial limit of $75 billion set by the Treasurer of The Millennia, Wayne Swan.

All promises are not worth the paper, or digital transmission device they are written on if you cannot pay for them.

So now that we are no longer going to have a surplus, even though Swan tried every clumsy accounting trick to fudge one, is our next little necessity a further extension of our nation’s credit card limit?

If this is not infuriating enough it always comes adorned with the embracing platitudes, whispering to each that “the GFC made us do it” and “this is not as bad as it looks”. Make no mistake though the kid is going to be sent to the taxpayer to bring up.

We are racking up debt without building anything, just supporting well meaning but in reality totally naïve frolics. Heaven help us if circumstance forces a nation threatening expense on us. In the meantime necessary infrastructure is designed, promised, but not built, filing cabinets full of great ideas all just waiting for a little money miracle.

No doubt, come May there will be a new budget with new promises of a surplus very similar to the previous ones they never kept.

The Nindigully Pub, located between St George and Mungindi, has a permanent sign out the front saying “Free Beer Tomorrow”. Swan could use them in his economic team.

Modelling released by the firm Macroeconomics last week projected another $50 billion in deficits over the next five years. But this hides the high price that others are paying for our exports. If we instead correct to more normal economic conditions, our deficits over the next five years could amount to more than $100 billion.

What if we correct to sub-normal economic conditions?!?

So instead of being in Canberra to fix this budget bungle of their making, the Prime Minister has decided to camp out in Rooty Hill for a week to explain how she really can be trusted now…

A word to the many well-intentioned folk who habitually rush to criticise the good Senator, by pointing out that Australia’s PRIVATE debt level is the real problem.

Yes indeed, that is true. Very true.

However, your humble blogger would respond by pointing to the dire state of nations abroad – such as Ireland – who were once, not so long ago, very much like us.

“Low” public debt. Huge private debt.

What happened when the bankers’ private debt Ponzi collapsed?

A huge chunk of the private debt problem – the bankers problems – was transferred over to the public balance sheet.

Too Big To Fail.

The bankers privatised the profits. Then socialised their losses.

My point is this.

The more our public debt rises unnecessarily – and wasteful, inefficient, non-productive, debt-financed government spending is precisely what Barnaby highlights – the greater the danger overall.

If (when) the government socialises the (inevitable and looming) losses of the collapse of our own private sector debt Ponzi, the public balance sheet will only be the less capable of doing so if more and more public debt has been racked up beforehand.

Wastefully. Non-productively. And unnecessarily.

That is the point.

If, in pressing your quite valid concerns over private debt, you are happy for the government to rack up more and more inefficient, wasteful, non-productive, unnecessary public debt, then you are simply inviting far more trouble overall, than the level of private debt alone implies.

2 Responses to ““Free Beer Tomorrow”: Labor’s Budget Strategy”

  1. JMD March 7, 2013 at 11:03 am #

    “All promises are not worth the paper, or digital transmission device they are written on if you cannot pay for them.”

    That includes government debt itself, not just the so called ‘debt limit’. Why doesn’t Barnaby come out & say it?

    What’s also never acknowledged, is that governments never repay their debts, rather, upon ‘maturity’, government debt gets rolled over into commercial bank credit. That is, government debt becomes part of the ‘base money’ of commercial banks which will only provide ‘fuel’ for ‘private’ debt levels to skyrocket.

    Watch the Broad Money Aggregate on the RBA website – Monetary Aggregates D3. From 1965 the growth has already gone exponential.

  2. Kevin Moore March 7, 2013 at 11:44 am #


    Jeremy Lee’s paper to the Inverell Forum March 2009

    “………So where are we at the moment? Are the many efforts to stimulate the economy going to work? Is the 1.2 TRILLION dollar package introduced by President Obama going to bring back the good times in America? Or the $2.3 billion dollar Budget Deficit Obama’s going to bring down? Will Wayne Swan’s retreat into the latest Budget Deficit of $42 billion restore prosperity to Australia? It’s madness!

    The human mind is limited in what it can grasp. One million sounds very much like a billion, and a billion sounds much like a trillion. Our minds switch off. Think of it this way: One million seconds comes to about 11-and-a-half days. A billion seconds comes to about 32 years! A TRILLION seconds comes to 32,000 years! Wayne Swan’s stimulus package, at a dollar a second, comes to one thousand and twenty four years! At interest our kids have got to repay!

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