Thought for Thursday
Readers of yesterday?s post Spin Cycle got a preview of my piece in today?s Fin (subscription required) and the debate in the comments thread has already anticipated some of the issues I raise. I commend a policy of higher taxes and more services to both parties. Here?s an extract
For Labor, a policy based on an explicit tax levy would provide a resolution of the inconsistency inherent in promising both the return of bracket creep and improvements in public services. Although such inconsistencies are par for the course in opposition, they will have to be resolved before Labor can present a credible program to the Australian electorate.
To take this course, Labor would have to drop the refrain that Howard’s is ?the highest taxing government in history?. The argument is bogged down in definitional disputes about whether the GST is a state or federal tax, and has gained no electoral traction.
By contrast, Crean’s proposals on health, education and the rehabilitation of the Murray-Darling have produced a strong positive response. In particular, the AC Nielsen Poll, showing Labor with 49 per cent of the two-party preferred vote is scarcely consistent with the view that the next election is unlosable for the government. With the right strategy, Labor would be a serious contender.
Looking back at the last ?unlosable? election, in 1993, it is evident that the threat to Medicare was a more potent issue than the much-overrated GST.
The government should also reconsider the wisdom of cutting taxes and services It might seem paradoxical to commend a policy of tax increases to the current government, but Howard and Costello have shown a surprising amount of flexibility on this score. Despite the disdain of economic purists, they have introduced a string of special-purpose hypothecated levies, and do not seem to have suffered electorally as a result.
Given the adverse reaction to the erosion of Medicare under this government, an increase in the Medicare levy to finance a return to bulk-billing would be a sensible political response. And, for a government that prides itself above all on not being like the Fraser government, it’s worth considering that Fraser scrapped Medicare and abandoned tax indexation. This government would do well to take the opposite course of action on both issues.