When Joe says he wants a surplus, he means for government but a deficit for everyone else!

The Australian public have just been told that: The ‘Age of Entitlement’ is over, we have been living beyond our means, we can’t afford to spend more than we earn, we are leaving an unsustainable debt burden for the next generation. Think of a neo-liberal falsehood and the chances are Joe Hockey will have used it in yesterday’s  budget speech. Most of all, we are told “we” need to move to balance the budget and achieve a surplus. Note that Joe means a surplus for government and a deficit for everyone else!

If the governments take more out of the economy than they spend back in, as they would by the definition of a surplus, and at the same time individuals and companies within that economy wish to save some of the money they earn, and if there is a drain of money from the economy to pay for net imports, then isn’t that a recipe for crashing the economy, Greek style?

There won’t even be any ‘improvement’ in the deficit. Joe knows that. All sensible economists know that depressing the economy will make it higher not lower. Tax revenues will simply fall by an equal or greater amount than the cuts he has made, as the economy spirals downwards. If he genuinely wants to reduce the deficit, if that is what is really important to him, he needs to press the fiscal accelerator pedal, not puts his foot on the brake. That way the economy grows, the tax take rises, people are more confident to spend and invest more, and as unemployment falls, workers start to pay tax rather than receive welfare benefits. If Joe hasn’t abolished those completely!

Edit: Further reading
http://bilbo.economicoutlook.net/blog/?p=27823

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s