Jan 27, 2011

Laugh until you cry — can we put a levy on political stupidity?

The debate over the flood levy is one of those moments that makes you want to cry over the mediocrity of our leaders.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

The proper response when Julia Gillard rises at the Press Club today to announce a flood levy is laughter -- the sort that slowly dissolves into tears. Tears at how stupendously awful this government can be. Its flood levy -- for which the way has been prepared with the usual Labor subtlety and sophistication -- is wholly unnecessary and wholly political, a product of how it has first allowed its opponents to dictate the terms of economy debate, and, second, bungled its own contribution to that debate. And it is unrelated to -- indeed, possibly antithetical to -- serious fiscal policy. Warwick McKibbin may not be on the government’s Christmas card list, but he’s not alone in saying the levy is unnecessary and perhaps even harmful given the state of the non-mining sectors of the economy -- Joshua Gans has made similar points. Alan Kohler has, too. There’s a serious debate to be had on our long-term fiscal strategy, including on the issue of whether the overall tax burden should rise in the long-run to address our ageing population -- a position, for example, argued by John Quiggin (who supports the flood levy). But at the moment any fiscal debate occurs in a political context where neither side of politics is willing to touch the billions of dollars of expenditure going to middle-income earners, or contradictory tax breaks. It also occurs in the aftermath of the debacle of the Rudd government’s handling of the Henry Tax Review. Roll on the tax summit -- we desperately need a circuit-breaker on our long-term fiscal strategy. Instead, we’ve got short-term, lazy policy from a government that didn’t have the guts or competence to keep fighting to make transnational mining companies pay something closer to what other sectors of the economy pay in tax, preferring to try to exploit sympathy for the flood victims by hitting PAYE taxpayers. And forgetting about serious policy for a moment, in doing so, the government has created a wholly unnecessary make-or-break moment for itself. It must sell the levy first to the Greens and independents -- all of them in both houses -- and then to voters. And we know how good this government is at selling anything. There will be much talk of "tough decisions" and how the government is prepared to do the unpopular thing -- but its history suggests that unpopularity reduces this government to a quivering mess. But it can’t afford to fail -- what if Tony Windsor and Rob Oakeshott decide they can’t stomach a new tax? And what if voters misunderstand the tax or react hostilely to it? Yes, the government would always have been confronted by a dilemma in addressing the floods, but it now faces a self-created problem that failure to secure passage of the levy will massively damage it politically. The only positives in this mess is that the government is taking the opportunity to get rid of the risible Cash for Clunkers program -- although you can be assured that was going to be jettisoned in the budget in May anyway. If Gillard announces some other decent expenditure cuts today, it might lift all this from the laughable to the merely terrible. Being right for once hasn’t managed to improve the Coalition’s prosecution of the case against the levy. Andrew Robb has started talking about how soft the economy is, when the Coalition’s line for 18 months has been that the economy is strong and the government should slash spending. And much sound and fury has emanated from that simpleton Barnaby Joyce (the ex-Shadow Finance minister, recall), who yesterday contrasted "downloading movies" (the sole purpose of the NBN, apparently -- he omitted to mention p-rn) with the much more Austrayan activity of rebuilding after floods. And while normally significantly saner than Joyce, Tony Abbott, remarkably, topped him by dubbing the levy a "mateship tax". At that point, you stop crying and start lying in a foetal position, whimpering and wondering who let any of these people on either side anywhere near power. Oh, wait.

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45 thoughts on “Laugh until you cry — can we put a levy on political stupidity?

  1. Peter Evans

    Where did the ALP get sh-tcanned in the the last election? Queensland. Surely the floods are a heaven-sent chance to buy a little goodwill…. That’s why the Coalition are so spooked by the prospect of Government spending ramping up north of the Tweed. Katter will love it. Oakeshott and Windsor, however, must way up the odds of losing their balance of power position in the next election.

  2. ronin8317

    The Government’s re-election strategy includes balanced budget in 2013 to neutralize the deficit hysteria from the Coalition. Begging to differ with other political commentators, a flood levy is better than more government debt because unemployment is below 5% right now, and a levy will shift resources into rebuilding without increasing the total demand of the economy. More government debt at this point of the economic cycle will be inflationary.

    The effect of the flood must be considered from both a ‘balance sheet’ perspective and a ‘demand’ perspective. On the ‘balance sheet’, the flood has destroyed a lot of assets, so it’s effect on the GDP is negative. However the flood also created over 20 billion dollars in demand for rebuilding, and that translate to a lot of raw material and labour. They do not appear magically, and a reduction in consumption in other sectors of the economy will be needed. Either we’ll get a flood levy, or we’ll get more interest rate increases.

  3. Ten black donkeys

    Are those of us who have already made donations to the Qld Premier’s fund (or any of the other flood relief funds) going to get rebates, now that we’ll be having to put our hands in our pockets again for a mandatory donation? Perhaps we should ignore all future appeals to help each other out because we can rely on the government to extract further levies from us.

  4. Holden Back

    Those of you who have made charitable donations to relief funds will have done so out of the generosity of your hearts and with no expectation of return to help individuals in need. (Of course, Ten Black Donkeys, you won’t be claiming those donations as a tax deduction.)

    Paying for public buildings, roads, stormwater, sewers, new levees, and flood mitigation is going to cost a great deal more over a long time. Even the Australian public at its most generous won’t cover that, and I would guess most people feel this is one of the proper functions of government.

  5. Lorry

    Another example of a lazy, ineffective and backward looking govt. The greens will love it because they are into heavy taxing. Now is the time to defer the defecit Julia and show real leadership. Alternatively, stop foreign aid and other waste of tax payer money.

  6. Meski

    @TBD: I guess that the Qld Premier’s Fund and others are deductibles when you put your tax return in. But you could have saved the paperwork.

    @The article. Yes, what were they thinking, calling it a flood levy? Damn it all.

  7. Ten black donkeys

    Well, Holden Back, I agree with everything you say (although of course I’ll be claiming a tax deduction if I’m entitled to one – who wouldn’t?). That doesn’t mean that a levy is a good way for the government to fund these works. For example, they could delay the return to surplus that they seem to think so terribly important.

  8. Kevin Herbert

    How long will Gaza Gillard last at this rate of policy stupidity?

    Give Bowen, or Combet or the drover’s dog…or anyone a go…Gillard’s simply not up to it…..just like Rudd, Latham & Beazley.

    In September 2010, I tipped she’d be gone by February (next month)……why am I feeling quietly confident.

    For the record, I too wanted a capable female PM from either side, ‘cos like many I believe the gender imbalance in politics is way off, and also becuase some of the most capable, personable managers I’ve met have been women.

  9. GocomSys

    I would have phrased it slightly differently: Whilst maybe somewhat saner than Joyce, Tony Abbott topped him by dubbing the levy a “mateship tax”. At that point we find ourselves lying in a foetal position, whimpering and wondering who let any of these people anywhere near power.
    Of course it is essential to hold this weak government to account but please, please, do not keep on quoting some of those morons giving them exposure they do not deserve. They stifle sensible debates, further adding to an already toxic environment.

  10. CML

    What a ridiculous article, Bernard! You might at least have waited to see what the government was going to do, instead of speculating on what YOU think they are going to do. I have just watched the National Press Club address by the PM and her answer to the followup questions from the usual suspects. What she had to say was imminently sensible – a mixture of levy (on taxpayer earnings OVER $50,000) and programme cuts, most of which are in the environmental area. These cuts are to schemes which mostly benefit the wealthy anyway – how many people on $30,000 or less can afford to put solar panels on their roof or install solar hot water (even with the subsidy)? And the cash for clunkers was a misguided policy anyway.
    PM Gillard also pointed out that carbon abatement would be much more efficiently dealt with if a price was put on carbon, and that is what they intend to do in 2012. I am no fan of Julia, but I think you have been spending too much time with the journalists from Ltd. News, Bernard !!

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