What if you invented a conspiracy theory and then people became convinced it was real?

The applicability of Umberto Eco’s Foucault’s Pendulum to Australian politics has hitherto been questionable but as the US shutdown heads toward two weeks, Coalition ministers might have to contemplate what happens when people really believe all that stuff about debt  ‘n’ deficits that they parroted while in opposition and act accordingly.

After all, it was the radical wing of the US Republican Party, the Tea Party, from whom Australia’s then-opposition stole its fiscal rhetoric, insisting that debt is bad, that Australia was in danger of default, as Nationals Deputy Leader Barnaby Joyce seriously claimed, less than two years before Australia’s credit rating was elevated, and that spending needed to be reined in. In the Coalition’s conspiracy theory, Labor was at-once genetically unable to curb its predilection to increase government spending, yet open to criticism when they put forward cuts during the historic slamming-on-of-the-fiscal-brakes in 2012-13. Of course, the Coalition found it dead easy, being born and bred for it.

But as we subsequently learnt, that was because the Coalition never really believed its own theory. After years of berating Labor’s fiscal policy, the Coalition belatedly locked itself in to precisely the same policy before the election. After Prime Minister Tony Abbott’s talk of a budget emergency, he took a “signature” policy to the election to establish a multi-billion dollar entitlement program.

In short, the Coalition behaved exactly like the Republicans traditionally behaved in the US — attacked the size of government, lamented the size of the deficit (especially if a “spendocrat” president was in the White House), and kept spending furiously anyway.

Problem is, there’s now a substantial core of Republicans who are not content to talk the talk on fiscal rigour, but want to walk the walk, and not just a short way, but the whole nine (trillion) yards, all the way into default if they have to. If that wrecks the US economy, well, you can’t make a small government utopia without breaking some eggs, right?

These are men and women — but nearly all men — who loathe the mere existence of government, either because they genuinely think it’s a source of communism (they have no actual idea what communism is, but they know it when they see it), or because they’re funded by super-rich extremists like the Koch brothers. For them, the longer the shutdown goes on in the US, the better, because it will demonstrate that the US can function with a dramatically scaled-back federal government.

A longer shutdown, the International Monetary Fund warned this week, would be “quite harmful” to the US economy, and a debt default, which comes into play on October 17, would inflict serious damage globally — although not immediately, given the options open to the US Treasury.

A US slowdown, not to mention a global shock, will make Joe Hockey’s job as Treasurer considerably harder and require a rapid bring-forward of any plans he has to stimulate the economy. It also means, given that in November 2011 Hockey demanded that Labor immediately release the Mid-Year Economic and Fiscal Outlook because of the developing threat of a European slowdown, he should release MYEFO sooner rather than later.

“Still stuck half in opposition mode, it seems like Hockey has started off doing the same thing.”

The irony isn’t merely that it’s the Coalition’s conservative counterparts in the US that will have done this, but that the Coalition so enthusiastically borrowed from these crackpots in its efforts to remorselessly demonise Labor, perhaps not realizing that these people really did believe that economies exist to serve government budgets and governments budgets exist merely at the convenience of the super-wealthy.

Hockey has already begun changing his spots on debt and deficits, although not quick enough to spare Treasury head Martin Parkinson, ousted in a disgraceful act of political bastardry. But his reaction yesterday to the latest IMF forecasts for Australia which shows Hockey is struggling to not only understand what being Treasurer is about, but also to avoid one of the  mistakes of predecessor Wayne Swan. As if he was still in opposition, Hockey seized on this week’s IMF report:

“It confirms the risks ahead for the Australian and global economy … Worryingly, the IMF forecasts Australia’s unemployment rate to rise from 5.6% in 2013 to 6.0% in 2014.”

As Michael Pascoe pointed out in excoriating Hockey’s response, that jobless forecast was better than the ones Treasury released earlier this year — forecasts Hockey said was politicised rubbish from Labor.

“The downside risks documented in the World Economic Outlook confirms [sic] significant risks to the Australian Budget that will need to be appropriately managed by the Coalition Government,” Hockey concluded. Not much point holding off on MYEFO because you don’t want to scare the punters, Joe, if you’re going to say things like that.

One of the things we once beat Swan up over was his tendency, even in the face of good economic news like a low inflation result, to resort to lines about how times were hard and how the government understood how tough everyone was doing it. Swan was the ultimate in underpromising and overdelivering — while he was presiding over the best economy on the planet, he was telling voters about how difficult things were for them. No wonder Australians were saving at a rate of knots, gave up their previous profligate ways in retail and paid down their mortgages as fast as they could.

Still stuck half in opposition mode, it seems like Hockey has started off doing the same thing. The economy is by no means trouble free, of course, but if Hockey wants consumers and businesses to feel more confident, he should be telling them the truth: the global environment has risks, we’re making the risky transition from the mining boom, we have to be careful about the impact of monetary policy on the housing market, but we remain a low inflation, low unemployment, high savings, stable, investor-friendly economy.

On that front, Hockey has some decision-making to make, in the national interest. The $3 billion bid for Graincorp from Archer Daniels Midland and the $390 million offer for Warrnambool Cheese from Saputo of Canada both promise to test the Treasurer’s strength of political character and the strength of Coalition harmony because of the Nationals’ opposition. For obvious reasons, the Treasurer has to give them the green light (with suitable conditions), if only to back his leader’s misleading election night rhetoric that “Australia is now open for business.” If there are indeed “downside risks” as identified by the IMF, then all the more reason why we need to welcome the foreign investment opportunities on offer.

Oh and by the way, if you haven’t read Foucault’s Pendulum, one of the inventors of the conspiracy theory dies after he’s hanged from the titular device in a Paris museum. Read into that what metaphorical significance you will.

It’s time to book your next dose of Crikey.

Through the week, news comes at you fast. Every day there’s a new disaster, depressing numbers or a scandal to doom-scroll to. It’s exhausting, and not good for your health.

Book your next dose of Crikey to get on top of it all. Subscribe now and get your first 12 weeks for $12. And you’ll help us too, because every dollar we get helps us dig even deeper.

Peter Fray
Peter Fray
Editor-in-chief of Crikey
12 weeks for just $12.