Big Government, Big Troubles

“A government big enough to give you everything you want is a government big enough to take from you everything you have.”

With these immortal words, Gerald Ford (38th President of the United States) clearly stated the continuing battle at the very heart of our political system. That is the reason I have an autographed photo of Ford on my office wall. It serves as a constant reminder that we must never give up in our determination to limit the size of government.

Broadly speaking, on the left of the political divide are the big government types who believe that government can spend your money more wisely than you can. On the right are those who have a commitment to smaller government and lower taxation so that you can keep more of what you earn.

Rarely in modern politics has this divide been as clear as it is right now.

Kevin Rudd is a big and reckless spender. He has wasted billions of taxpayer dollars and borrowed billions more. In fact, he is scheduled to borrow another $97 billion to fund his extravagant spending over the next two years!

Let’s put this in perspective. The last time Labor was in office they left us with a debt of $96 billion. It took more than a decade for the Coalition Government to pay it off.

Now reckless Rudd will have accumulated over $150 billion in debt after just three years with the first capital repayment of $1 billion expected to be made three years from now. At that rate he’ll have paid off his binge spending in only 450 years!

Regular readers will be aware that debt is dangerous for governments. The only ways to get rid of them are through inflation, increased taxation or lower spending.

Kevin Rudd has chosen the taxation path with his latest Budget attacking the current profit centre of the Australian economy – mining. He has declared that any profit in excess of 5.75 per cent of capital cost is a ‘super profit’ and will be subject to an additional 40 per cent in tax.

The Rudd Government expect this tax grab to add around $12 billion annually to their revenues.

What Mr Rudd hasn’t told you though is what happens if the commodity boom comes to an end. Under his scheme, taxpayers will actually be liable for 40 per cent of the losses incurred by the mining sector.

That’s right, Kevin Rudd has effectively nationalised the mining industry, making us all liable for corporate losses.

Most of us have already suffered as a result of Rudd’s reckless mining tax policy.

Billions of dollars have been wiped off the value of mining shares as a result of his new tax plans. This has had a dramatic (and negative) effect on superannuation balances across the country.

It could have a much bigger effect in the years ahead if the mining boom slows down or even comes to an end. History would indicate that this is an inevitable occurrence.

What then? The government will be responsible for writing cheques to compensate mining companies from your taxes. Given Rudd’s track record, that’s a situation we should all feel uncomfortable about.

As Kevin Rudd punts the public purse to grow the size and influence of government, he is increasing the risks for all of us. Based on the lessons of history and Rudd’s poor form, a betting man would say it’s odds on that it won’t end well.

If that’s the case, we’ll all end up paying a heavy price.

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