Labor’s budget continues a path set since 2007. It shows the technocratic skill of a government clever at policy detail; but also one unable, or perhaps unwilling, to challenge the economic straitjacket it has adopted since the 1980s.
That leaves a budget that makes life fairer for the majority, but at the expense of an increasingly marginalised minority. It reflects the politics of a party more committed to core values than it is credited for, but also much more timid in actually pursuing them.
That logic is at the centre of this budget. There is a clear, continued commitment to a fairer society. The budget increases tax revenues largely from high profit companies and high income earners, and it expands payments to, and lowers taxes for, low and middle income families. Combined, these changes will have a substantial redistributive impact. But it shies away from even modestly difficult political territory, and so reinforces a worrying division between the deserving and undeserving poor.
These achievements are all the more impressive because they come despite Labor accepting two political straitjackets initially imposed by conservative economists, but increasingly willingly accepted by Labor. It can simultaneously leave observers in awe of its ability to manoeuvre so skilfully in such a confined political space; and yet deeply disappointed by just how little room Labor has left itself. In this sense, it’s a budget for the technocratic true believer.
Smoke and mirrors
The first straitjacket is Labor’s iron clad-promise to achieve a surplus. Unwilling to make the argument that employment and growth are more important than reducing debt, Labor has abandoned its brief adventure in defending Keynesian economics and the need for a larger role for the state, and instead embraced the logic that underpins the austerity drive in Europe.
But having put on the straitjacket, Wayne Swan has proved almost Houdini-like in avoiding the most important negative consequences. The cuts have generally hit the rich rather than the poor; and have been structured to do everything possible to promote employment while reducing debt.
There are two sides to the Houdini act. The cuts come from those areas with the weakest link to consumer spending – defence contracts for largely imported machinery and tax concessions for the savings of high income earners.
Alternatively, the new spending goes exactly where it is most likely to improve confidence and spending – to low and middle income families, the same target as the highly successful stimulus payments.
This is exactly what the old Keynesian model suggests, but wrapped in the clothes of austerity. The effect is topped off by some clever rearranging, extra spending happens just before and just after the financial year, maximising the surplus while minimising the effect of withdrawing funds.
The “deserving poor”
Discussions of welfare often focus on government payments. But promoting employment has always been the core pillar of Labor egalitarianism. As is clear from a quick glance at Europe or the US, unemployment is the bedfellow of poverty.
But this only leads to Labor’s second straitjacket. While the party has accepted the need for redistribution, in line with its historical values, it has increasingly abandoned another key element of the social democratic project, a commitment to a right to a decent standard of living. Labor’s defence of equity is limited to what we might call the “deserving poor”.
New spending targets families with children. This is an important group, and indeed the steady increase in family payments since the 1980s has been responsible for a significant decline in child poverty, just as Labor’s increase in the age pension has reduced deprivation amongst the old. But for groups with less public sympathy support has been hard to come by.
Labor excluded the unemployed from the stimulus. It has not only accepted, but extended the Northern Territory intervention. It not only accepted work for the dole, but has now extended “welfare reform”, reducing payments to many single parents.
There is a small increase for some of those on the lowest payment, but much less than for other more “worthy” groups. This is a clear sign that Labor has given up the struggle for the right of Australians to be free of poverty and treated with dignity, and instead reinforces the neoconservative logic of workfare.
But even here, there are some clever tricks. People often fit many categories. So while single parents may get less as single parents, they receive more as families with children; and they receive extra assistance with child care as potential workers, looking for jobs or undertaking education and training. It minimises the impact of policies that marginalise the “undeserving poor”, but it also tends to reinforce this division.
Dancing on a pinhead
It helps to explain why it is that Labor can seem so at sea and so disappointing, while at the same time appearing to have made real achievements (particularly in retrospect).
It’s the product of increasingly technocratic true believers, who fight for redistribution, while denying they are really redistributing. Who target payments to prevent child poverty while talking only about “cost of living”, and who covertly promote stimulus while appearing to embrace austerity.
You can be impressed by how expertly they dance on a pinhead, yet wonder why they don’t lift their head, argue on principle, and perhaps gain a little more room to move.