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Federal

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.

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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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