Wednesday, March 18, 2009

Bonus Bungling More Perception Than Reality

The federal opposition has been trying for some time now to depict the government as being fiscally irresponsible for splashing too much cash up against the wall in its economic stimulus packages. It has accused the government of plunging the nation into debt, racking up a massive national credit card bill, without delivering sufficient economic benefits to justify the splurge. It has been a message that has met with only modest success, because overall the government has won widespread praise for its response to the crisis and its willingness to take action.

It did seem all the more hypocritical when the opposition was forced to reveal that even if they had been in government they too would have been forced to deliver a budget deficit and accrue a debt which in the larger scheme of things was not much different from the one contemplated by the current government. There is widespread agreement that it is legitimate and necessary for our government to use deficit and debt to fund stimulus packages to both bolster the economy and help shield the vulnerable from the worst of the impact of the global recession.

But it is often the detail which brings even the grandest schemes undone, and so it is with the Rudd government’s decision to dump cash into the economy by way of cash handouts. While it is true that it is quick and can be an effective boost to economic activity, it is an approach that is not without its problems. One of the problems is the risk of upsetting anyone who misses out on the free money. Human nature ensures that there will always be some envy which can accumulate into a political backlash. What’s worse is when those who do receive the handouts are seen to be undeserving.

Following on from the revelation that as many as 60 000 pensioners who live overseas received handouts in the December package, comes the news that the tax bonus due next month will be collected by convicted criminals who are behind bars for anything from muggings to murder, along with tens of thousands of foreigners and expatriates who have worked in Australia during the qualifying period. Such revelations would seem to lend weight to the accusation that the stimulus plans have been ill thought out, poorly targeted, and rushed into effect without proper consideration. Handing out money to foreigners is not going to be seen to do anything to help the Australian economy or to protect Australian jobs, while rewarding prisoners in jail for hideous crimes is just an insult to law abiding people who have missed out on th emoney for whatever reason.

While it’s easy to understand how this state of affairs lends credibility to the criticisms, it amounts to nitpicking to suggest that the leakage of less than one percent of the package into offshore bank accounts somehow invalidates the stimulatory effect on the Australian economy. In practical terms it is negligible. But in political terms it’s a whole lot more damaging. It unnecessarily provides ammunition to critics and provokes resentment in the community. The problem is that the political damage is far worse than the fiscal damage.

How hard would it have been to ensure that free money was only handed out to Australian citizens and permanent residents with a current home address in Australia? How hard would it have been to disqualify prisoners currently in jail for serious offences? By failing to address these matters the government has left itself open to the criticism that it has been reckless with taxpayers’ money, even though the damage is more perceived than real. In politics, perceptions are always important, and the perception that the government has failed to pay attention to detail will inevitably lead to the question of what else they might be getting wrong.

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