Tuesday, February 10, 2009

You call that a stimulus?

Something I've wondered about is where the line between private and public debt lies? The Australian federal government is seeking permission from the senate to place the budget in serious deficit and spend $42 billion. Of course the Neoliberals are in hysterics: it's too much too soon, pork-barrelling, what a burden to place on the children of the future, tax cuts would give people more money to spend and the choice of what to spend it on.

But at the centre of the financial storms promoting such measures has been the tsunami of private credit that washed up around the world over the last decade. To some extent the 'discipline' of a budget surplus has its shadow-side in the blow-out of private debt required to pay for the social services and goods that government spending would once have met the costs of. The government subsidisation of private health, childcare and education services through rebates and direct payments, and the shift to private and often church-based provision of (un-)employment services have combined to effect a redistribution of revenue into a set of public-private funding arrangements. Government spending here promotes, for some, debt bingeing as the means to shift to the better funded and superior services of private health and education. This neoliberal support of the private sector thus promotes household debt.

Be that as it may the recent, now receding, wash of credit in the world system was itself a crack-grade stimulus that for a time seemed to be never ending. As Nick Gruen argues the current Australian foreign debt of $658 billion (60% of GDP) makes of the proposed $42 billion (around 4% of GDP) stimulus a jar of instant coffee when lined up against the crack-filled barrell of household and private debt.

Is the government's plan akin to weaning us of high-grade stimulants, replacing the addiction to lines of credit, reverse mortgages, multiple juggled credit cards and portfolios of investments for something healthier for the body-economic? Is there a plan?

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