Budget 2014 – You lose, the rich win, and what you can do about it

By Glenn Murray

www.glennmurray.com

Hockey’s budget will hit us hard

By now you probably already know Hockey and Abbott have targeted you with their budget. If you don’t, read this, this, this and this.

Or if you don’t have time for that, here’s a good summary…

But big biz is $30 billion better off!

What you may not know – but undoubtedly do suspect – is that big businesses and their super-rich owners aren’t helping with the ‘heavy lifting’. No matter what Hockey says, they’re just not doing their fair share. Here’s why…

In his budget speech last night, Hockey said this:

I say to the business community we need you to help out. Rather than corporate welfare… Businesses should stand or fall on their ability to produce the goods and services that people actually want.”

Yet in the very next sentence, the very next, he said this:

…we are cutting company tax by 1.5 percentage points for around 800,000 businesses. We are abolishing the carbon tax and we are abolishing the mining tax.”

That’s a $30.9 billion tax handout over 4 years! ($16 billion company tax cut, $5.3 billion mining tax cut, $9.6 billion carbon tax cut. There are a few other wins and losses for business, but they seem to cancel each other out, as far as I can tell.)

Sounds like corporate welfare to me…

And bear in mind, this is on top of $10 billion / year that big polluters are already getting in tax handouts!

How does Hockey explain this?

When asked how big business is doing its fair share, he said:

…we’re only able to lower the company tax rate for 800,000 businesses. For larger businesses we can’t, so they’re doing heavy lifting in a sense.”

In other words, their contribution to the heavy lifting is not getting more tax breaks!

This is called ‘trickle-down’ economics

The practice of giving big tax breaks to big business is known as ‘trickle-down’ economics. The idea is you make things easier for businesses, so they can create more jobs, and then share the resultant wealth with their employees and society. The benefits supposedly trickle down.

But does trickle-down economics help anyone but the rich?

What really happens in a trickle-down economy is that the corporations take their tax handouts (corporate welfare) and their owners just get richer. Simple.

Look at America, for example. They’ve been practising trickle-down economics for years. Clearly it’s not working there. They have greater income inequality than some third world countries, and God help you if you lose your job or need to go to hospital!

But if that’s not enough proof for you, look at our own recent history…

Our governments have used trickle-down economics for years. Here’s what’s happened…

Company tax rates have dropped significantly

Since 1980, our company tax rate has been steadily dropping.

The rich have gotten richer, but the rest of us haven’t

Whatdyaknow? Since 1980, as company tax rates have dropped, only the rich have gotten richer. The rest of us are earning pretty much the same as we were back in 1980.

(And, no, the rich won’t be paying their fair share, as a result of this budget. High income earners will have to pay an extra 2% tax on earnings over $180,000 per year. But only for 3 years. And let’s face it, they’ll hardly feel that! And it’ll raise only about $5 billion, in any case.)

Housing has become less affordable

Of course, if the cost of living had decreased over the same period, then static income wouldn’t be so bad. But it hasn’t. Housing, for example, has become less affordable.

Unemployment hasn’t really changed

What about unemployment? Is trickle-down economics reducing unemployment rates? Nope. Although it’s been up and down, unemployment now is about the same as it was 35 years ago.

But more unemployed people are living below the poverty line

Does the trickle-down approach improve the lot of those unemployed people? Nope. To the contrary, they’ve fallen quite a way below the poverty line…

In fact, poverty has increased, across the board

Poverty has steadily increased since 1994-95 (unfortunately I couldn’t find stats back to 1980). The black line is the one you’re interested in. It shows increasing poverty when changes in living standards are taken into account.

So, with this budget, Hockey’s really just going to make the rich richer

Doesn’t look like there’s too much ‘trickling down’ going on, to me. In fact, it looks like we’ll all get worse and worse off, the longer our government persists with ‘trickle-down’ silliness.

Then why is he doing it?

Why do politicians persist with trickle-down economics, combined with austerity measures? Well, I can think of three possible reasons…

1) He’s just out of touch

If you’d like to give politicians the benefit of the doubt, you might simply say they’re out of touch. Clearly Abbott and Hockey have no idea what it’s like to be a 24-year old on the Youth Allowance, earning $29 a day, then having to part with $7 to go to the doctor, another $7 to get a blood test, and another $7 to get the results. Or worse, to be a 29-year old, who’s been out of work for 5 months, and been earning NOTHING that entire time, and to know that when you finally do get your Newstart allowance, you’ll be getting only $36 a day! (Remember, there aren’t enough jobs for everyone. So until there are, there’ll always be long-term unemployed people. In February, for instance, there were a total of 140,800 job vacancies in Australia, and more than 700,000 people out of work.)

Here’s some proof that Hockey, at least, is definitely out of touch (it’s an interview with him minutes after he gave his budget speech)…

2) He’s influenced by political donors

If you’re a little more cynical / realistic, you might deduce it’s because big business has the money to pay for private, confidential, back-room meetings with the treasurer. The below is a genuine screenshot from the Liberal party website. (Do you really think these profit-obsessed businesses are going to part with that money without something in return?)

Here’s a bit of an intro to how political donations work:

3) He’s corrupt

If you’re very cynical / realistic, you might assume that our politicians are corrupt. Revelations from the Independent Commission Against Corruption (Icac) over the past few weeks would certainly support this world-view. So far Icac has outed the NSW Premier, its Police Minister, two Senators and two MPs. All for illegal fundraising activities. Activities which, by the way, are closely linked to the Federal Liberal party. My local MP, Karen McNamara, for example, is under investigation for failing to declare approximately $80,000 of donations, which turned out to be from illegal sources. Importantly, Abbott hand-picked McNamara to be the member for Dobell, even when she had this cloud hanging over her head.

And don’t forget, there’s absolutely no debt crisis

All of this scare-mongering and austerity politics from the government is a beat-up. Australia is one of the only countries in the world with a AAA-rated economy. There’s absolutely no debt-crisis. So bear that in mind when you’re thinking about how this budget will impact you.

What you can do about it

If you think this is unfair, don’t stand for it. You don’t have to wait ’til the next election to make a difference. That’s not how democracy works. Here’s what you can do now:

1. Contact your state’s senators – The budget now has to be approved by the Senate before it can come into effect on July 1. Contact the senators from your state and tell them to block the budget. Also tell them which bits, in particular, you don’t like, and why. Politicians are, as you know, very vote-conscious. If enough people want them to block the budget, or part of it, they’ll do it. You don’t have to write a paper letter (although that’s always best). Emails work too, and even Twitter and Facebook are worthwhile.
2. Educate people – Raise awareness. Educate friends and family, express yourself in social media, and blog about your thoughts…
3. Take it to the streets – There are protest marches in Sydney, Melbourne, Perth andAdelaide this Sunday, May 18. And more marches, all around Australia in August. Come along. I’ll definitely be there (in Sydney). And don’t worry if you’ve never marched before. The Gosford march in March was my first, and there were plenty more like us there. In fact, from those I spoke to, it seemed most of those marching were first-timers.

Here’s the letter I’m sending

Feel free to copy or adapt this letter and send to your senators.

—————

Dear XXXX,

Please block the government’s budget.

Why? Because it’s both unnecessarily austere and completely unfair. Here’s why…

There is no debt crisis:

• Australia is one of only 13 AAA-rated economies in the world.
• We have the third-lowest net debt to GDP ratio in the OECD.
• Our debt is not spiralling out of control. By world standards, it’s remained relatively stable since 1980.
• Our debt is, and always has been, well below the OECD average, and always by approximately the same amount.
• Our ability to service our debt is good.
• Our inflation rate is low and stable.
• Our unemployment rate is low and stable.
• Our Gross National Income (GNI) per capita is well above the OECD average.
• We spend less on cash benefit welfare than all but 4 countries.
• Our public spending is lower than the OECD average.
• Only 7 OECD countries spend less than us on pensioners (based on 2010 total social expenditure, not just cash benefits).
• We spend less per GDP on healthcare than the OECD average.
• We’re currently not increasing our healthcare spending at all per capita.
• Australia’s chief economists and academics agree there’s no debt crisis (including Craig James, Shane Oliver, Paul Bloxham, Saul Eslake, Kieran Davies, Chris Richardson, Raja Junankar and Glenn Stevens).
• The OECD has warned us against a harsh budget, as has CPA Australia chief, Alex Malley.

(Sources for all of the above here: http://www.glennmurray.com.au/abbotts-war-on-the-rest-of-us-and-why-theres-no-need/)

The budget places a disproportionately high share of the burden on welfare recipients, and low and middle-income earners:

• Introducing a Medicare co-payment (of any amount – universal healthcare is a must).
• Raising the pension age.
• Introducing a 6-month wait before school-leavers can get Youth Allowance.
• Paying 25-30yr olds Newstart for only half of each year they’re unemployed.
• Relegating under 25s to Youth Allowance instead of Newstart.
• Reducing the cut-off for Family Tax Benefit B to $100,000 from $150,000.
• Cutting Family Tax Benefit B for families where the youngest child is six or older.
• Freezing all family benefits until either 2016 or 2017.
• Increasing in the petrol excise.
• Allowing hospitals to charge for visits to emergency rooms by patients with ailments that only require a visit to a GP.
• Increasing the price of medicines on the Pharmaceutical Benefits Scheme with a $5 fee.
• Loss of the Seniors Supplement for Commonwealth Seniors Health Card Holders.
• Raising the pension age to 70 by 2035.
• Dropping two years of Gonski funding to public schools.
• Deregulating universities so they can set their own tuition fees (which, according to the architect of HECS, will increase the fees for some undergraduate degrees to $200,000).
• Increasing the interest rate on uni student loans.
• Decreasing the income threshold at which graduates have to start paying off their student loan.
• Cutting funding to public hospitals by $50b.
• Reducing the Medicare rebate for various procedures, deferring the dental program, and axing the national partnership agreement on preventative health.
• Tightening the criteria for receiving and retaining a disability pension.
• Making multiple cuts to Aboriginal programs.
• Making multiple cuts to foreign aid.
• Making cuts to the ABC & SBS.
• Making multiple cuts to environmental and renewables programs.

Big business on the other hand, isn’t just let off the hook, it’s being given $30.9b!:

• $16 billion company tax cut.
• $5.3 billion mining tax cut.
• $9.6 billion carbon tax cut.

And that’s on top of $10b/yr big polluters are already receiving in tax handouts.

Where is the fairness in this budget? A 24-year old on Youth Allowance will have to spend 24% of her day’s pay to go to see the GP. (48% if she needs a blood test.) Joe Hockey, or anyone else earning $500k per year, will spend only 0.05% of a day’s pay!

If passed, this budget will further widen the gap between rich and poor. It will increase rates of crime, homelessness, sickness, poverty, food scarcity, depression, domestic violence, suicides, school dropouts and under-education. It will also place massive strain on middle Australia, causing parents to work longer, worry more, and spend less time their families, friends and support networks. It will undermine the quality of our future innovation and industry capability, and put us at a severe competitive disadvantage, internationally. It will increase our reliance on coal – as a source of both power and export revenue – and will decrease the likelihood that we’ll be able to develop the more complex economy that we so badly need to develop, in preparation for the time when we can no longer rely on simply selling cows and dirt.

Yes, we have an aging population. And yes, we have a challenge to meet in order to support them. But cutting costs and undermining our future economic and industrial prosperity is not the way to meet this challenge. We need to be investing in infrastructure that will generate more revenue for Australia.

In the short-term, this means retaining the carbon and mining taxes, and ending tax concessions for fossil fuel companies and big polluters. In the medium to long term, it means investing in renewable energy, science, education, R&D, small business, and IT infrastructure and innovation.

Last, but not least, we need to stop wasting billions on concentration camps. Our treatment of asylum seekers is inhumane, breaches international law, and costs an insane amount 0f money – both in direct spending and in future losses due to damage to our international reputation and national psyche.

Please do not pass this budget.

In fact, I urge you to block supply altogether. This government has proven itself to be dishonest and heartless, guided more by big business and the IPA than by common sense, humanity and good economics.

It needs to go.

Your truly,
Glenn Murray