Thirty-four billion dollars of tax cuts ensured the coalition maintained the political initiative during the first week of the election campaign. Whether the policy will make any difference to the poll result is too early to tell.
It won't, if talkback radio is any guide. In all likelihood the latest batch of coalition advertisements asking, "How many union leaders are ALP frontbenchers?" will prove to be better value for money at getting the government re-elected. On the morning following the tax cut announcement, calls on talkback radio were four to one against the government. Most callers argued it was more important to improve "services" than provide tax cuts.
This might simply be the result of the ALP being more effective than the Liberals at mobilising their supporters to get on the airwaves. But even accounting for this, the talkback calls reflect an attitude that does exist. There is a strong sentiment in the community that reducing personal income tax is less legitimate than government increasing spending on services such as health and education.
The belief that the best way to improve the quality of services provided by hospitals and schools is for government to spend more money on them is now so ingrained in the popular consciousness that it's almost futile attempting to refute it. All the international research on schools, for government to spend more money on them is now so ingrained in the popular consciousness that it's almost futile attempting to refute it. All the international research on schools, for example, shows that once expenditure per student reaches a certain level any additional spending produces marginal benefits, at best.
This is the sort of evidence dismissed by those constantly pressing for expanding government budgets. As yet, no one has answered the question of when will we know that governments are spending "enough".
For all practical purposes enough will never be enough. Our demand for services is ever-increasing, while our capacity to satisfy those demands is finite. In the debate about services versus tax cuts there's no recognition that if the after-tax incomes of individuals increase they have a greater capacity to decide for themselves what services they want and how they want them delivered. The value of a service is best measured by the willingness of individuals to pay for it. Services offered in response to deliberate consumer choices are better than those provided according to the dictate of bureaucrats.
The proof is the performance of non-government schools compared with that of their government-controlled counterparts. Unfortunately, the coalition has been as bad as Labor when it comes to encouraging the idea that the solution in any policy area is to spend more money on it (or for the federal government to take it over). Liberal MPs might ponder one of the achievements of their 11 years in office. Voters' expectations of what government should do for them are now higher than ever.
It's no wonder that the coalition has had little success in reducing the size of government. It hasn't even tried. The fear of offending voters accustomed to government largesse is too strong. On Wednesday, the ABC's chief political correspondent, Chris Uhlmann, asked Finance Minister Nick Minchin, "Where are the true economic liberals who want a low-taxing small government?"
First, the minister defended the coalition's record. Second, he said: "This government has constrained the growth in government spending more than any government since World War II. The growth in government revenue and spending has been lower under us than under any previous Labor administration."
What Minchin said was true, but hopefully it doesn't represent the limit of the Liberal Party's ambitions. Increasing government spending less than the ALP is a good start, but that's a far cry from actually cutting government spending and allowing taxpayers themselves to decide how to spend their money. In 2005 Tom DeLay, Republican leader in the US House of Representatives, famously declared there was really nothing left to cut in the federal budget. That admission caused an immediate political problem.
The point has been made that "voters concluded, plausibly, that if we're going to have Big Government we might as well entrust it to politicians who don't pretend they oppose it". This is exactly the problem the Liberals confront in Australia. It is one of the reasons the party is out of power in every state and territory. People are happy to have ALP state governments spend their money for them. This election will determine whether this phenomenon extends to Canberra.
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