In the AFR yesterday my CIS colleagues Gaurav Sodhi and Jeremy Sammut see a rare silver lining in the ideological storm clouds of the financial market meltdown. The driver of bloated government – the easy money flowing into Treasury’s coffers during a long boom – is about to slow. And

[as] government revenues [] fall, [] there won’t be the same scope for irresponsible spending promises. This is no bad thing. More straitened times give governments an excellent opportunity to implement unpopular measures, strike down bad policy, and enact new reforms.

History suggests that real cuts in spending are very rare, occurring only at the tail end of long periods of severe deficits. Dire fiscal necessity can let politicians get away with truly tough decisions; it is not enough that money is tight or spending programs are a waste of money. The largely petty savings in the first Rudd Budget, despite the big talk about spending constraint and the start of a new government being politically the most favourable time to make cuts, suggest how hard governments find tackling the areas that drive big-dollar spending: welfare, health, education and defence.
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