Joe Hockey and Andrew Robb explain why we shouldn’t raise our debt limit
Monday, October 14, 2013/
“The only reason the government needs to lift the debt ceiling again is because of its own incompetence.”?—?Andrew Robb, 2011
Andrew Robb was Labor’s harshest critic on Australia’s debt ceiling. According to the then-shadow Finance Minister, Labor only needed to raise the debt limit “in order to fund its reckless spending and waste.”
Robb didn’t become Finance Minister when the Coalition won office, though. That honour fell to Mathias Cormann. But Robb had an important colleague who agreed with him?—?Treasurer Joe Hockey, who was also happy to borrow the Tea Party’s rhetoric about debt.
According to Hockey late last year, “Government debt is about borrowing taxes from future generations that have to pay the principal and interest on those borrowings. The increase in the debt limit to its current limit was simply because of Labor’s “legacy of waste and reckless spending,” he had said about the budget in 2012.
Worse, according to Hockey, government borrowing “crowds out” the private sector. “[D]ebt is placing upward pressure on interest rates domestically and has an effect internationally, making it more difficult for enterprise,” he said in 2011.
(That assumes that the government borrows domestically. What if it borrowed offshore to avoid “crowding out” the domestic private sector then? Well, Hockey was onto that as well, criticising Labor for borrowing from foreigners —?even though it never did.)
So, now that the Coalition is in power, they shouldn’t need to raise the debt limit, because it was entirely the consequence of Labor’s incompetence, and raising it would cause domestic interest rates to rise, damaging the private sector. The Coalition surely wouldn’t “crowd out” the private sector now that we’re “open for business”?
Oh, but wait.
“We will have to increase the debt limit to prevent Australia breaching the debt limit before Christmas,” the Treasurer said from the US over the weekend. Legislation to raise the national debt ceiling beyond $300 billion is expected to be introduced when Federal Parliament meets.
“We need to lay down a medium-term path that lifts the growth rate of Australia and inoculates us against what will be a fairly volatile period over the next few months and perhaps the next three to four years,” Hockey said.
It was as though Hockey had been to the black hole that is politics in Washington and recoiled at his own reflection. On fiscal policy, he is now indistinguishable from Wayne Swan, focused on a medium term fiscal strategy that won’t crimp our below-trend economic growth in the face of external problems?—?like the debt ceiling crisis caused by Mathias Cormann’s mates in the US.
“Fortunately, no one in the Coalition now appears to believe what Hockey and Robb had to say about debt limits.”
That’s as it should be. But it makes Hockey and his colleagues total hypocrites.
The hypocrisy isn’t purely historical. Hockey was rightly railing against entitlements again on the weekend, suggesting that you “cannot let [them] get away”. That’s while he’s about to launch a budget process that will centre on a new, extraordinarily expensive middle-class entitlement scheme for parents. If Hockey wants a “medium term path” then tearing up his leader’s “signature” Paid Parental Leave scheme would be a good start.
We’re going to continue to play this game of pointing out the myriad ways in which the Coalition is acting in ways completely at odds with its opposition (or for that matter contemporary) rhetoric. Why? Not merely to point out hypocrisy?—?we know there’s plenty of that to go around on all sides in politics. Labor in opposition during former prime minister John Howard’s term were little better; its pretence that voters were “doing it tough” in 2007 due to the cost of living was every bit as shameless as Tony Abbott’s carbon price scaremongering.
No, we’ll do it because when you speak one way but act another, you raise a question about what you actually believe. Did Hockey really think government borrowing “crowded out” the private sector and drove up interest rates (of course later he began saying interest rates were at “emergency lows”)? If so, did he think that because he doesn’t understand economics (unlikely; he might be a lawyer but he’s a bright bloke)? If he didn’t, did he say it with an intention to deceive voters? Did he just not care? And what does that say about Hockey’s values?
Hockey’s Damascene conversion this year to sensible economic policy has been the subject of several articles by us in the past month. Policies that are sensible now were sensible before the election and deserving of bipartisan support. But Hockey, Robb, Cormann and Abbott all ignored the obvious national interest and plumped for narrow, political self interest.
Perhaps Hockey and Abbott and the rest of the Coalition confuse their self-interest with the national interest. Many people in public life do that, but it seems a particular foible of the Right, which is so closely allied with business, a sector that reflexively and strongly believes that whatever is good for business is good for the country, and who are encouraged to think thus by their media cheerleaders.
Progressive parties have their own foibles, self-interest and hypocrisies, of course. Most particularly they are an instinctive interventionism and a deeply unhealthy obsession with propping up industry sectors with strong unionisation.
But persisting in acting hypocritically invites people to wonder what your motivations are, and how they change over time. Fortunately, no one in the Coalition now appears to believe what Hockey and Robb had to say about debt limits. That’s the difference between the new government and the GOP lunatics in the US Congress. But the questions remain.