The brokest nation in history still wants to add more. Even 42% of Republicans were in favour. Mitt warned you about the 47%, but it’s a lot more than that. How would it be any different here?
I did manage to get through Q&A last night but what caught me right from the start was where Wayne Swan, former Treasurer, said to Kate Carnell, the newly installed CEO of the Australian Chamber of Commerce, that ACCI had NEVER sought balanced budgets. Never is a long time and having been the ACCI Chief Economist up until a decade ago, I can say with perfect assurance that at least in my time, ACCI, previously known as the CAI, had never sought anything other than balanced budgets.
Way back, as far back as the days of Bob Hawke as Prime Minister, I wrote an article for our newsletter titled, “An Australian Economic Miracle?” Not many things on the net from the late 1980s, but I did find this:
“An Australian economic miracle, a truly Lazarus-like recovery is now a clear possibility,” says the Confederation of Australian Industry (CAI) in a newsletter this month.
Following the 1987 share market collapse, everyone across the world got religion and more especially Paul Keating here in Australia who balanced the budget in 1988. This was then – and always was while I was there – CAI/ACCI policy. Balancing the budget by lowering expenditure was a near-on certain cure-all for me and so it proved. What then wrecked it all was the almost immediate concern that the economy was overheating that then required the administration of a ridiculously high interest rate regime which brought on the “recession we had to have”. I had to spend the next five years shouting at the government for ruining it all with its monetary policies but it was by then too late.
But in that brave moment in 1988, Australia was set for the most remarkable recovery you ever saw. The flack I took for saying what I said, along with the organisation, was prodigious. But the then Labor Government, having balanced the budget, was indeed overseeing an economic resurrection that at the time no one had noticed was in place. So I wrote the article, signed off by my CEO, and once the recovery became common knowledge, had to endure the idiocies involved in cooling down what had only just picked up.
Balanced budgets work, and deficits do only harm. The evidence that the policies of the classical economists were overwhelmingly better than the policies of every mainstream text of the time, and of today as well, was demonstrated to me, just as it would be demonstrated again when Peter Costello balanced the budgets in the period after 1996. I am therefore pleased to see that Kate Carnell has reiterated the long-term policy of the Chamber.
And if you would like to have a better understanding of the underlying theory, you could not do any better than have a look at my Free Market Economics. Strange to relate, it is to my knowledge the only book of its kind.
A story on how balanced budgets have caused the Canadian economy to boom. From which this:
We have a lot of cases available to us to test the proposition that we will increasingly be hearing that balancing the books is over-rated. If the all-stimulus-all-the-time Keynesians are correct, for example, France should be the strong man of Europe, for its Socialist president came to power rejecting “austerity” and preaching the virtues of stimulus. Britain, which pursued a course of fiscal discipline under the coalition government of David Cameron, should be in steep decline.
Instead the head of the International Monetary Fund, Christine Lagarde, recently had to apologise to Britain’s Chancellor of the Exchequer for having wrongly warned that his austerity policies would provoke disaster, as Britain turns in one of the strongest economic performances in the EU. Overtaxed and tapped out France, by contrast, continues to be the sick man of Europe. Interviewed on British television Ms Lagarde acknowledged that Britain’s growth seems “pretty sustainable” because it depends on private sector investment and consumer spending.
Economic theory of the Y=C+I+G variety has a lot to answer for. Balanced budgets accompanied by limited growth in public spending are the key to prosperity. The opposite can be seen everywhere in the misery and harm that are caused (see the US for exhibit A). Canada and the UK are now examples of how private sector growth along with what others choose to call “austerity” actually do create the foundations for economic growth.