Hockey the fantasy economist may as well have farewelled Middle-earth

Joe Hockey in his time as treasurer certainly received his share of kicks – including by me (for example, here, here, here, here, here, here and here). He would have been within his rights to have concluded his final parliamentary speech on Wednesday by paraphrasing Richard Nixon and suggesting to the media that you won’t have Joe Hockey to kick around anymore. Departing politicians usually go out in style with a speech full of dignity and magnanimity for all, but Hockey’s speech contained so much partisan argument that it allows one final shove to his political funeral barge as it drifts over the Pacific towards his expected new role as ambassador to the US.

His speech contained all the usual platitudes and gushiness about colleagues and staff that come with all such speeches. But having got through the usual guff, Hockey turned his speech into a partisan rant that attempted to defend his work as treasurer. Mostly, however, it served to remind listeners of all that was wrong with his time in charge of Australia’s budget.

The crux of Hockey’s argument was that “the Abbott government was good at policy but struggled with politics”. And he suggested that “nothing illustrated this better than the 2014 budget where the government had more courage than the parliament”.

Hockey argued that the Abbott government “could have done more to win over the Australian people”, and he bizarrely suggested the failure was because “in modern politics it’s far easier to demolish good policy proposals than to build and implement them”.

Actually good policy proposals are bloody hard to demolish because they come built on solid foundations of research, consultation and data, not the straw of slogans and glib half-baked ideology.

Hockey’s first budget – despite his belief that it was an attack on entitlement – was overwhelmingly an attack on the poorest.

So unfairly targeted were the policies that the budget papers left out the usual tables which showed the impact of the budget on various family types.

The National Centre for Social and Economic Modelling calculated the impact as overwhelmingly a hit to poorer couples with children, and single parents:

This wasn’t good policy sold poorly; it was terrible policy sold worse.

But not content with declaring his first budget a winning policy document, Hockey on Wednesday also challenged “all and sundry to name a speech in the last 20 years that has influenced the national debate in the way that the end of the age of entitlement speech did”.

Julia Gillard’s misogyny speech? How about John Howard’s “We will decide who comes to this country” speech, which still shapes (for good or ill) immigration policy 14 years after the fact? Even on economic policy, Rudd’s “this reckless spending must stop” speech had more influence, given it caught Howard flat-footed and helped ensure an ALP win at the 2007 election.

Hockey’s speech, given in London in 2012, was a barely reheated 2008 Republican party stump speech that even Mitt Romney delivered with more plausibility, and was influential only for highlighting how resistant Hockey was to economic reality.

But Wednesday’s speech was almost worse. Railing like someone who had drunk too many glasses of red at an IPA Christmas party, Hockey related how disgusted he was that when his young son broke his leg it only cost “$35 to cover the cost of a waterproof leg cast”.

I guess he could have argued that his tale showed how as a high income earner he paid a means-tested Medicare levy plus a high income rate of tax to fund a system that enabled all Australians to benefit regardless of wealth. He could have mentioned how it demonstrated the social contract in Australia, that wealthy people are less likely to begrudge their taxes going to fund public health because they too benefit.

He could also have noted how this system has ensured public health is never viewed as just a poor person’s health system, but rather one which provides an exemplary level of care.

Instead, Hockey painted it as the reason Australia is in debt. He argued that “we borrow billions of dollars to pay for the health and hospital system, and he [his son] and his generation are going to end up paying for it”. Hockey suggested it was “unsustainable”.

“It is unfair and I will not be party to a generation that passes the buck. What we have to do is live within our means.”

What utter crap. First, why do we need to “live within our means?”

Any major company that was not in some level of debt, nor taking advantage of record low borrowing rates that Australia has at the moment, to both fulfil its obligations or to invest, would see its board of directors sacked.

But no, we have to treat our government with a $400bn budget and a Triple A credit rating as though it is a family with no capacity to borrow from a bank. Idiotic simple-mindedness.

And moreover Australia’s health spending is not increasing because of rich kids getting their broken legs fixed but because we have an ageing population.

As Stephen Duckett noted in a paper for the Grattan Institute, Medicare is not unsustainable, nor is the issue a lack of means testing, but more (among other technical funding issues) that the changing demographics has seen a shift in primary care from acute to chronic illness.

Not only is Australian public spending on health less than the OECD average, we are already one of the highest private funders of health:

But our system is also one of the most efficient. Bloomberg last year ranked it 6th best in the world – ahead of all English speaking countries and miles in front of the much more privately funded USA system, which came in at 44th.

This is really the heart of Hockey’s age of entitlement manure. On the surface, it would seem he is all about ending cash welfare. For example, he noted in his speech that “it is unconscionable in 2015 to have non-means-tested welfare. How someone in the top 1% of income earners can still qualify to receive welfare payments, free health care or free education is beyond me”.

The reality of course is that close to bugger all of the top 1% receive welfare payments. Australia has one of the most strictly means tested and targeted welfare systems in the world.

In 2013-14, 90% of the richest 20% (let alone the top 1%) received zero to less than 1% of their income from government cash benefits of any kind:

And when we break it down according to welfare type, in no category does the top 20% receive more on average than 0.6% of their disposable income from welfare:

Hockey’s railing against the richest getting welfare handouts is so loaded with fantasy he may as well be talking about the economy of Middle Earth.

But it is his line about “free health care or free education” that cuts to the chase. Again, he ignores that the value of benefits of education and health are also targeted according to income:

It goes to Hockey’s view of the world: one where public education and health are viewed not as essential services, but as welfare.

He suggested that “we need co-payments in health, greater cost recovery in education, and universal means testing in welfare so that we have a sustainable and affordable social safety net for those most vulnerable in the community”.

Hockey’s age of entitlement was not really about cash benefits; someone so dependent upon straw men knows it’s the entitlement to free health and education, that the wealthy receive.

His solution, the GP co-payment, was a typical Hockey fix. It failed to address the actual problem and was likely to see unintended consequences because a price signal is a poor way to influence people’s health decisions. To top it off, it was so poorly designed that Hockey himself misunderstood crucial aspects of how it would work to the point that the AMA’s spokesperson suggested, “He either doesn’t understand or is misusing the statistic or is lying”.

In his final speech, Hockey sought to suggest he had a solution to long-term problems by bringing up the fact that he released the “intergenerational report which detailed the challenges and opportunities Australia’s ageing population brings”.

But the report symbolised almost perfectly all that was wrong with Hockey’s treasurership.

He turned what had always been a fairly apolitical document released under the Charter of Budget Honesty into a partisan attack on the ALP. His office constructed lame-brained spending forecasts out to 2055 based on their projections from the 2013-14 Wayne Swan budget. The projections laughably assumed no changes to taxation or spending over the next 40 years purely in order to come up with a pallid fear campaign about debt.

Rather than make Australians “fall off their chairs” in shock at the numbers, his transparent motives had them rolling their eyes, and the Intergenerational Report was forgotten within a week.

When he turned to industrial relations, the usual Liberal party lines were uttered: “WorkChoices did go a little too far” (just a little too far, mind) but that “I’m afraid Labor went too far the other way and we have a structural imbalance in our workplace relations system that does cost Australians jobs and better paying jobs at that”.

Funnily enough, this structural imbalance hasn’t led to anything other than the Reserve Bank noting that, compared with previous periods of weak economic growth, “increased labour market flexibility may have provided firms with more scope to adjust wages in response to a given change in demand for their goods and services”.

But why should reality become part of a Hockey speech at such a late date?

Hockey also took the chance to reveal what he really would have liked to do, were he not burdened by the most policy-lightweight prime minister since Billy McMahon.

Hockey suggested on Wednesday that “both our superannuation system and our age pension entitlements must be calibrated for our changing demographics” – and certainly he gave hints while treasurer that he wanted to change superannuation concessions even if Abbott didn’t.

But on Wednesday Hockey also suggested that “negative gearing should be skewed towards new housing” and that currently it was “an incentive to speculate on existing property.”

This was rather a u-turn on his statement in March on ABC’s Q&A when he put forward the furphy that “if you abolish negative gearing on investment properties, there’s a strong argument that rents would increase”.

Alas the evidence was that this didn’t happen in the 1980s when negative gearing was briefly abolished:

Even worse, just two months ago, Hockey told the Weekend Australian that there was “no merit” to changing negative gearing laws because it was “a way for people on medium incomes to get into the property market”.

That was Hockey as treasurer: all talk that never held up to scrutiny, policy put forward for either baseless ideological purposes or because it might wedge the ALP or target people who were deemed not to be Liberal party voters. And the ever-present demand for brownie points for taking a “tough” stance.

The problem for Hockey as treasurer wasn’t that the policy was good and the politics poor, but that the policy was all about politics – and combined, both were dreadful.