What is a deficit ?

Back in my home city of Adelaide, Australia, last week for family reasons. While there, I followed the political debate on the Federal government’s budget. The government of Labour Prime Minister Kevin Rudd was under attack from the opposition for proposing a deficit, after years of surplus under the previous conservative government of John Howard. Australia did well during the years of the commodity boom, with its vast reserves of iron ore and other minerals, not to mention a thriving export trade in wine, wheat – and, yes, educational services. One of the world’s major trading nations, Australia was one of the few to have a positive trade balance with China – the booms in both countries were linked.

As the crisis hit, trade slumped, so revenues took a dive. Like the US and Chinese leaders, Rudd introduced a major stimulus package, including big amounts for infrastructure, notably for modernization of schools. So the Federal budget announced in parliament this month swung from surplus to deficit. This is classic Keynesian economics – build up fiscal surplus during the good times, then use that surplus to stimulate the economy out of recession in the bad times (these days, economists talk of building in “counter-cyclicality”, which is desirable, as against “pro-cyclicality”, which is not).

Discussing the surplus/deficit issue in layman’s terms, I share an observation of one of my brothers, John Harris. “Sure, we had a big fiscal surplus” he said “but at the same time we had a huge deficit in infrastructure”. A former school principal, John now has responsibility at one of our Universities for student teaching practice in schools. He gets to visit lots of schools – public and private - throughout the state. “It’s a disgrace to see how many of our public schools were allowed to run down, while the government was building up those surpluses” he said.

So what is a deficit really? Is it just the economists’ fiscal deficit? Or is it also the real deficit in terms of neglected infrastructure, including dilapidated schools? It is the same issue in the United States, where the Obama Administration is using the stimulus package to start repairing infrastructure after years of neglect, to modernize schools, and to strengthen public facilities like bridges, while moving towards a green economy. Information coming out of China suggests they have the same idea there, with an urgent need to put resources into earthquake proof schools, a need shown tragically by the huge death-toll of children and teachers in the Sichuan earthquake, while stimulating the domestic economy.

Part of our campaign strategy everywhere should be to emphasize the deficit in our public facilities, including our schools, colleges and universities. Let’s not leave the debate over “what is a deficit” to the economists and the politicians. We should try to re-set the agenda for that debate by talking about the deficit in the facilities where teachers work and students learn.

Startling revelations!

Today, I’m attending the TUAC Working Group on Economic Policy at the OECD in Paris. Watch here tomorrow for some startling revelations about what the IMF and the Central Banks knew before the crisis –and failed to tell us!

Also tomorrow: Upheaval at the UN

ITUC advises there is much confusion about the draft outcome document of the UN General Assembly (see my item of 11 May http://fundingeducation.blogspot.com/2009/05/un-high-level-paper-ignores-education.html). The special session on the financial crisis, due to start in New York next Monday, is now likely to be deferred!