Debt, tax, wastes and infrastructure

Comments on Peter van Onselen “Unlike a household budget, the national economy goes on forever”, 15/12/2010, http://www.theaustralian.com.au/business/opinion/unlike-a-household-budget-the-national-economy-goes-on-forever/story-e6frg9if-1225971141902
Peter, what you said is obviously true. However, you ignored a few important points.

Firstly, the combination of wastes and increasing government debt is never to be a good look. Under such circumstances, arguing against increasing public debt is not a bad thing to do. That is because there is available fund to do the things you argued which can be done using public debt.

Secondly, the politics of governing and opposition is very different. The opposition's main job is to hold the government to account and expose any shortcomings, weaknesses and mistakes of the government. It is the job of the government to determine what direction to take and what the priority should be.

In this instance, whether there is a need to increase government debt to fund any infrastructure building. Even under this scenario, the government has had difficulties in arguing its case because of its inability to put a business case and cost benefit study for its NBN that it argues is the largest nation building infrastructure project ever.

Thirdly, it is always better to have no debt or lower debt than higher debt, other things equal. The argument that the nation lives forever and grows forever cannot be used to have government debt for that sake. One must prove that the benefits outweigh the costs of having debt.

Fourthly, there is also a trade off between government debt and higher tax and the net benefits between using the two, just as private companies do in terms of using equity and debt financing. That also has an inter-generational dimension. It is interesting that you have not put any reason using debt is superior to more tax.

In summary, it appears that the opposition has done a very good job in its argument against increasing the nation’s public debt and forced the government to take a more cautious approach to spending than otherwise it would do.

Regrettably, the government is continuing its NBN white elephant project in spite of its exposed wastes in pink batts and BER. That is deplorable.

That should be applauded and supported, as opposed to your half rational argument to the contrary.