I had been worried that the ‘big government conservatism’ critique of the Howard government may actually please its Ministers, helping to fend off attacks from the left and claim the much fought over middle-of-the road voters. And that seems to be the case. In his quasi-rebuttal of CIS criticism in this morning’s Australian, Finance Minister Nick Minchin says:
IN politics, fighting battles on two fronts is an unavoidable obligation for parties aspiring to hold the middle ground. ….
Such criticisms delineated a bizarre dichotomy between the Government’s critics on the Right, deriding us for creating a nanny state, and the more predictable Labor attacks that the Government was heartless and meanspirited.
Rudd says the Government spends too little on education, while the CIS bemoans that real per-capita education spending has grown faster under the Coalition than Labor. Rudd attempts to portray the Government as attacking working families, while the CIS has the Government showering these same families with undeserved largesse.
Ah yes, and the Coalition is in the sensible centre. But Minchin is still sensitive to the claim that his is a big-spending government. Though conceding that
It is true that spending on health, education and social security has risen under the Howard Government. It is true that in real terms the Howard Government spends more in these areas than Labor did.
He goes on:
Despite the claims of big government conservatism, it is actually very difficult for our critics in the free-market think tanks to cite credible evidence that the size of government has grown materially in the past 10 years as a proportion of the economy.
In my big government conservatism article I did not use spending as a proportion of GDP at all, but instead looked at real per capita spending. My case for doing so was that there is no intrinsic reason why spending should increase at the same rate as the economy generally. Big spending areas of the Budget such as health and social security are more affected by demographic than economic changes, and to the extent that social security is affected by changes in the economy it should be to drive spending down, not up, as people move off benefits into jobs. In an economy that is performing well, which to the Howard government’s partial credit it has over the last decade, measures based on government spending as a percentage of GDP can cover many spending sins.
But even if we take spending as a proportion of GDP as the measure, Des Moore made a convincing argument in the Spring 2006 issue of Policy that the improvement since 1995-96 is due to lower interest payments, and that the government’s ‘discretionary’ expenditure as a proportion of GDP was slightly higher in 2004-05 than it had been in 1995-96.
From a smaller government, lower tax perspective the most positive thing that can be said about the government is that it could have been worse. But the main debate here is not about which set of numbers to look at. It is about the spending programmes themselves and whether they can be justified. I still would not like the family spending programmes even if government spending overall was shrinking.