Howard/Costello budgets were in structural deficit

[Jovial Monk]

And of course the structural deficit became a cash deficit when the GFC hit. The bulk of the deficit is the fault of Howard and Costello!

From PB:

Howard and Costello “were” well aware that they were putting the Budget into “Structural Deficit”. They just chose to ignore that”fact” to keep getting elected. Treasury clearly warned them about this “fact” but they chose to ignore it and certainly didn’t advise the electors or Labor about that “fact”!

“The structural budget balance deteriorated from 2002-03, moving into structural deficit in 2006-07,” Treasury said in budget paper No1 on Tuesday night.”

Coalition faces a ruinous record

The charter of budget honesty was meant to take the guesswork out of fiscal policy for voters because it gave Treasury the opportunity to update the numbers in the middle of the campaign.

We were told there would be surpluses into the next decade. In fact, the budget was shot at the time of the election because too much of the revenue windfall from the resources boom had been handed back as tax cuts and increased spending.

"The structural budget balance deteriorated from 2002-03, moving into structural deficit in 2006-07," Treasury said in budget paper No1 on Tuesday night.

The Coalition will resist this reading of recent history. It will want to argue that a larger surplus on paper in the good times would have been untenable because the electorate wanted its money back.

It should give up now. Peter Costello left a trail of clues in the extensive interviews he gave to authors before and after the election that John Howard's mania for spending was damaging the integrity of the budget.

The more the Coalition pretends that it left the budget battle-ready for the global recession, the more it plays into Labor's hands. Every new government craves the narrative of the black hole, and Wayne Swan has a credible story to tell on the structure of the budget - up to a point.

The Treasurer is correct when he says the dramatic plunge into deficit wasn't his doing. It remains primarily the fault of the global recession and the former government.

This can be seen with a simple calculation. Let's assume Labor didn't spend a dollar since the world economy turned turtle. That is, it did what the Opposition seems to have been demanding, by keeping fiscal policy tighter in recession than it had been under the Coalition in the boom.

Take out the stimulus, in fact all new spending since last May's budget, and you get a run of whopping deficits that linger well after the economy is supposed to be growing again. This is where common sense must kick in for the Coalition and the structural deficit moves from the realms of theory to a statement of the obvious.

http://www.theaustralian.news.com.au/st ... 83,00.html

Access Economics has maintained from early days in the Howard/Costello govt that the budget was in structural deficit.

A clue to how true this is is the fact no-one offered either Howard or Costello a well-paying job in private enterprise. Private enterprise knew they were crap at economics!

[Rainbow Moonlight]

So what is structural deficit? Sounds like it maybe related to tax and spending- are they saying that Howard and Costello set up a situation in which government receipts would not be able to in the future cover government costs?

While it might not have been wise to set up an unsustainable situation- if that is infact what they have done- there is also an argumen tin favou rof sharing the wealth in good times and tightening the belt in bad times.

Personally I think the worst thing the Howard government did, from my own experience, is change the family law stuff- I have struggled financially to look after my children ever since the new legislation meant that the income I received from my husband to look after the kids was cut by a third. I used to give the kids 10 dollars a fortnight pocket money and most fortnights now i cannot do so, and i owe my husband rather a lot of money.

[Jovial Monk]

The budget is a summary of expected tax inflows and government expenditure--the day to day, regular stuff.

Pretty much all of Tip's budgets, due to his numerous tax cuts to the wealthy and Howard's prolific pork barreling and middle class welfare had more government expenditure than tax inflows--they were in deficit.

What allowed ol' Pouty Pete to show a surplus is that he counted first the income from privatising public assets and then money from the mining boom as if they were regular income.Well, no public assets left to flog and no more mining boom and suddenly we find ourselves where over the next five years expenditure exceeds income from all sources by over $200Bn--this deficit is due to Tip and Howard.

Labor is trying to rein in govt spending but is not being helped by the stupid Liberals who are hanging on with all their might to the Howard legacy, not realising how toxic it is. As an example, the Fibs voted against changes to the health care rebate. Howard instituted this stupid rebate--middle & upper class welfare pure and simple--and at the same time ripped money out the public health system "because the health care rebate will reduce the load on public hospitals." Of course it never did and the health care rebate is a crap piece of policy that needs to be reversed.

If Labor had not spent money on the stimulus, including the schools spending, a lot more people would be out of work, a lot more businesses would have failed, expenditure on the dole have gone up and tax revenues would have plummeted even more, leading of course to a bigger deficit.

Another way to put this structural deficit angle. Say you are in a syndicate to buy lottery tickets. Your luck changes, and from the syndicate you make $100 a week for a few weeks. Would you count that $100 a week into your regular household budget? Of course not, you know the run of luck will change: Howard & Costello were much less intelligent than you and believed the luck would continue forever.

[deepthought]

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[LeftofCentre]

The private sector deficit was more than a little formidable.

[deepthought]

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[Jovial Monk]

Budget was always structurally in deficit. GFC hit, structural became cash deficit.

[deepthought]

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[deepthought]

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[LeftofCentre]

The private sector deficit was more than a little formidable.

And the answer to my question is . . . .

While not everyone agrees with modern monetary macroeconomics, you will see that I have already gone a long way towards answering your question with that statement.