Thrift paradox costs Bertie budget bet

The Liberals laughing in parliament

Hockey’s budget is a Ma and Pa conspiracy to run off with the housekeeping

Psychic’s don’t win the lottery so I should have known better. I like risk though, so I bet against the petrol levy.  I hope none of you went out and put the farm on SportsBet. “Too bad, so sad” if you did. I lost the farm shortly after I lost the plot.

The budget outcome confirms one thing, ably captured by First Dog on the Moon’s wonderful infographic in the Guardian: The government is not trying to manage the economy, it just wants to hurt the people who vote against it.

The evidence is simple, but you will have to follow the bouncing ball for the rest of this piece.

The government talks as if it is the equivalent of a very large household and that if the budget does not add up then then we will all suffer.

The analogy does not hold.

The government is one member of a very large household. Since it is a bunch of old white men, it is tempting to assign it the role of the father in our analogy but, in fact, the government is more like this bunch of old, white men’s traditional view of the mother.

The father’s role we will give to international trade: The money that comes in and out of the country/family. The net exports, aka the balance of trade, in this analogy is the amount of money that papa puts on the table. He pays the builder, buys the cars and the holidays.

Mama, our government, takes some of that money to feed the little kids who do not earn, to provide the services that this traditional family need and on the side she does a couple of things that bring in a bit of extra revenue. She makes up the difference in nanna flat rent, Air B and B on the spare room and the household allowance from Dad. That, if you like, is the mama tax.

The rest of us – the nation’s businesses, workers and consumers, aka the private sector, are the kids, the boarders and nana in the flat out the back that was once a garage. We dip into the family resources, sure, but we also bring back a reasonable amount of loot from our wanderings. Since we put the Air B and B advertisement online, there has been enough money for us all to upgrade our phones and buy a couple of nice items of clothing. Well done Mum.

If you look at the overall budget, Dad generally brings in more than he spends, if he doesn’t the rest of us are going to have to work pretty hard to keep the boat afloat. On the other hand, Mama often spends more than she earns.

So those three sectors together form the household. Of course the household budget has to balance. If Dad and Mum are making money, life is pretty cushy for the kids. In those houses that struggle to make ends meet the kids are out there working, and paying board.

I once had an affair with an economist who called this sectoral balance. He insisted my household analogy over simplifies the issue. No-one could understand a word he said so I shifted my affections to a saxophone player and kept on using this household analogy. Most people get it and if it annoys a certain sad duck well that suits me just fine. Not that I’m bitter, just vengeful.

Let us leave vengeance cooling so it can be served better later and return to our analagous household.

If Dad stops earning and we have a trade deficit, then times will be tight. Nanna’s rent might go up, the kids might start paying board, the violin lessons might stop. If Dad and Mum reduce spending at the same time, then the cost of living will go sky high. The economist ex calls this the thrift paradox of macro-economics. It is the problem with austerity measures. By trying to balance the economy, you push the cost of living up and make everyone, especially the poor majority suffer.

The paradox is hidden by the government pretending that Mama’s budget is the budget for the whole household. It is ignoring Dad’s contribution and the fact that there is actually a reasonable amount of money on the table from the various hangers on.

So, Mama has to balance her budget by feeding us less, stemming our bleeding wounds with rags from the bag on the back of the laundry door, and refusing to pay for our magazines, school books and phone cards. We have to fend for ourselves now, in the interests of a more ruthless, market-driven family.

Dad is rapt. Without the strain of all those brats on his weekly wage he can spend a bit more on his golf clubs, next car and whatever else takes his fancy. Nanna and the boarders don’t give a toss. If there is a better quality of toilet paper on the hanger and a maid does the cleaning instead of Mum then so be it. It is the kids who suffer.

In this government’s official model of the economy, though, that does not matter. At least Mama’s budget balances.

There is a more awful thruth, though: balancing Mum’s budget without reference to Dad’s (the trade deficit, if you have wandered off) means they are bleeding the rest of us dry, not for financial reasons, but as First Dog on the Moon puts it, as part of a “payback budget”.

A cynic might think that Mama has been plotting with Dad and no longer has the kid’s well being as her top priority. In what could be a working definition of corporate feudalism, Ma and Pa have their hand in the cookie jar and are conspiring to run away with the housekeeping.

The age of enlightenment is indeed over, we are deep in the counter-reformation.

Just an aside: The lack of psychics winning the lottery is clear evidence of their failings. In the same way the absence of time travellers in our midst probably precludes the possibility of it ever being invented. No?

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