Tuesday, February 10, 2009

Let's call a stimulus snob a snob

Let's respect consumer sovereignty

Shane Wright's brilliant column in the West Australian:

Stimulus snobs need to get over their bad case of payout envy

Stimulus snobs. That’s my name for people, often high income earners, who whinge that money handed over to “working families” will be wasted on plasma screens, Xboxes and the like.

You see it among the cartoonists who invariably show someone with a ciggie hanging from the mouth and a plasma under the arm walking out of Harvey Norman.

Politicians and commentators of certain persuasions talk about the money being “wasted”.

“I’m worried about when big chunks of money turn up in one fell swoop just before Christmas, because a couple of weeks later you see a lot of Australia’s $10 billion scattered around the floor with Made in China on the back,” Nationals Senator Barnaby Joyce said of the initial package.

Nationals leader Warren Truss, in arguing against the Rudd Government’s latest round of $950 payouts, said many of the payouts from its $10.4 billion stimulus package had been wasted on goods supplied by “Chinese trinket traders”...

This from the last trade minister of the Howard government whose job included negotiating a free-trade deal with China.

Obviously the Nationals think the good folk of Gosnells should use any Government cheques on a hay baler or new seed for next season’s crop.

But what it actually shows is a degree of snobbishness that seems to ignore that people should have every right to do whatever they like with any cash handed to them.

And, in the case of politicians, ultimately the cheques are our money, paid for out of our taxes. The Government’s just been holding on to our money for a while and it’s come back for us to do what we like with it.

Indeed, it appears there’s been a delineation made between money given to pensioners and that handed over to low to middle-income families.

Pensioners, bless their darned socks, are invariably described as “hard working” who have “given their all for their country” and so “deserve” a bit of a helping hand from the Government.

I don’t disagree with any of that sentiment.

But when it comes to low to middle-income families getting cash … well, if they’re not down the local pub they’re sitting in front of a one metre wide plasma screen watching a 10 pack of cheap DVDs bought on special at Big W.

The fact these families are the ones who keep the economy ticking over, who provide the workers that keep the business doors open and whose decision to stop spending because of the avalanche of bad financial news is part of the reason for the current crisis, is ignored by those who aren’t happy that these folk are getting some cash from Canberra.

I think part of this snobbery is due to another new disease that is developing — payout envy.

There was a long list of groups that complained after both stimulus packages that they had “missed out” on anything.

OK, you are a double-income couple earning $250,000 without children (but maybe with a labradoodle) who have the $500,000 mortgage on the beachfront house.

So, yep, you are suffering and should be given a handout — it’s a waste to give it to the single $60,000 income, three-kid family with the kelpie running around the back yard. They’ll just blow their money on a something from Mr Truss’ Chinese trinket trader — not an “investment” in a set of blinds imported from Venice.

What all of this debate misses is the importance of getting cash flowing through the economy.

During the Senate committee inquiry into the Government’s $42 billion stimulus package, it was Senator Joyce who looked down upon the free insulation in housing aspect of the program, saying it was not nearly as good for the economy as building a piece of economic infrastructure.

But as Treasury secretary Ken Henry explained, that economic infrastructure should be built no matter what was happening in the economy.

However, the global economy is so bad that you have to look at projects that get cash flowing quickly.

Throwing pink batts up into the ceilings of 2.2 million homes is much easier and quicker than setting out a new rail line or designing a new port (and those batts will invariably go into the homes of low-income earners without insulation, thereby saving them money from lower energy bills).

And in the case of those pink batts, Treasury officials think it unlikely that many people will turn down the chance to get cooler in summer and warmer in winter for free.

Sometimes I do wonder whether our elected officials have an idea just how bad the economic situation overseas is. I’m convinced ordinary punters are unaware, but their job is not to develop policies to insulate the economy from those overseas headwinds — the way things are going, the most important thing they can do is just hold on to their job.

But those really watching overseas events are gobsmacked.

So far the value lost on sharemarkets and property markets across the globe is around $US60 trillion ($90 trillion) — or the size of global GDP.

Governments have spent somewhere around $US3 trillion on stimulus packages, with more to come, including the latest Obama administration package worth almost $US900 billion.

The International Labour Organisation estimates up to 50 million could lose their job this year around the world. Two million Americans lost their jobs between
September and December and in the last week of January US firms announced another 70,000 jobs would go. And yet we’ve got some stimulus snobs back here in Australia, upset that people aren’t spending money on the right things, fearful they’ll blow it all punting on the dogs while enjoying a beer.

Funny that the retail trade figures for December, when the first stimulus package started flowing, showed a 3 per cent fall in the amount of money spent on liquor.

Maybe the stimulus snobs need to drown their envy in a glass of Grange. The rest of us are too busy drinking our VB.