How to halt the decline
fiscal policy left a structural budget deficit a string of governments have since been unable to plug. Howard, he writes, “taught people to expect a handout outside an election campaign, which created a permanent sense of entitlement”. The “Howard gift” — large, regular cuts in personal income tax from 2005 onwards that saw its share of national income dip to the lowest level since the 70s — was particularly culpable, neutering bracket creep’s role in budget repair. This is a controversial view: had the tax cuts not been made, the budget might not be in much better shape; governments are very good at spending whatever money they have.
Megalogenis includes interesting interviews with Ken Henry, secretary to the Treasury during the Howard and Rudd-Gillard governments, former Reserve Bank governor Ian Macfarlane, and Paul Volcker, the US Federal Reserve chairman who destroyed inflation in the 80s. Henry concedes Treasury should have argued against the income tax cuts in the knowledge the revenue boom would not last: “It’s very difficult in that environment to firstly convince yourself that it’s only temporary and then, if you have convinced yourself, you’ve got to turn around and convince everybody else.”
There are plenty of opportunities to dispute Megalogenis’s economics. Most economists would probably disagree with his claim the global financial crisis would have been a good time