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Tuesday 17 February 2015

Want money? Tell us who pays!

Cacophony of demands

Dissatisfaction abounds. Education, healthcare, security, indigenous affairs, welfare, all beckon for resources with increasingly shrill calls to action. Not a day passes without some individual or group arguing their case in the media.

The demands are often simple and specific, requesting a justifiable "investment" of public funds either to achieve greater benefits or to avert decline and social costs. The claims are substantiated by statistics and success stories, and although many of the statistics, I suggest, would not pass muster by any but the most cursory examination, and that many of the claimed benefits are not directly measurable, lets take them at face value. No doubt there are many, many projects which would provide great benefits to our common wealth. But where can the money come from? This is rarely raised as part of a demand. After all the focus is on the problem and the benefits of investment. Any discussion about funding could be a distraction. Even in those cases where there is a suggestion of how to fund the investment, it is by general statements such as ; "a new levy", "general revenue", or "the welfare budget".

Limited sources of funds

Ultimately the target for all these calls is the ''magic pudding" of public money; state or federal governments. Since these governments are not sitting around with loads of cash, quite the contrary, all governments seem to be in debt up to their necks, all funding can only be achieved by increasing taxes, borrowing or offsetting any new spending by cutting another program.

Raising taxes is an anathema to the electorate, and consequently for politicians who want to be re-elected. Hence it is generally avoided, until all other avenues have been exhausted.

The second option is taking the money from another program. Unfortunately politicians find this option difficult as it always carries a backlash from unhappy voters who lose funding for their projects.

Finally, borrowing which is often the last option standing. Borrowing is a mixed bag. It can be readily justified when the expected revenue generated by the target program is greater than the expected outlay. This will apply to projects which in one way or another add to productive capacity. However borrowing for improved welfare or social services is effectively spending money you haven't yet earned and is unsustainable. Consider it as borrowing from your grand-children. By the way much of our current deficit is due to expenditure on social services and hence borrowing to pay these deficits is effectively asking our grand-children to fund our lifestyle.

Whenever a politician announces a new initiative using public funds, which have not been budgeted, the money is being borrowed. They are spending money we don't have.

Squelching Squeaky calls

With the many conflicting demands money and resources what should a society do? How can a society rationally distribute its wealth and resources and satisfy the many conflicting demands of special interest groups?

Currently it seems it is the squeakiest door that gets oiled and this has generated a cacophony of demands.

I suggest we could lower the volume by demanding that whenever any group advocates an investment of public funds they should identify the source of the funds they require.

If they suggest there should be new taxes, tell us how much and who pays.

If it is to be by borrowing, prove that the investment will generate greater revenue over time.

If it is to be from general revenue, then tell us who you are asking to forego their funding.

Fat chance I hear you say? I guess so. After all why would any advocate want to weaken their case and perhaps generate opponents to their cause? Sure they will resist, but we the public, directly and through the media, should demand it.We should insist that the funding question be answered before any money is spent. This also applies to our politicians, who often make funding commitments without due consideration of budget constraints. It is all too easy to spend future money, especially when it belongs to someone else.

 Our media should never flinch from asking the question, "where is the money coming from?"

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