The Australian, p10   ANDREW Leigh has joined the Labor chorus foreshadowing higher taxes and higher spending policies. Tuesday’s intervention was revealing and frightening: a glimpse into Labor’s emerging socialist agenda. With few remaining hints of the Hawke-Keating model of centrist reform, Labor is now driven by the hard Left, apparently unperturbed by economic reality.

Leigh says Labor could balance the budget with carbon and mining taxes. This is not only wrong, it would strike at the heart of our competitive advantage in an increasingly competitive world.

The mining tax revenue never eventuated, and was bound to fail even before the collapse in the iron ore and coal prices. The world’s biggest carbon tax by a country mile unfairly punished Australian businesses and simply shifted emissions, jobs and tax revenues offshore — just as has happened in Europe. Hopeless in design, any tax economist knows that, in a global economy, imposing excessive local taxes to solve global problems simply does not work.

Leigh defends massive spending increases (beyond those already committed to) in schools and hospitals that were never budgeted by Labor. He defends spending billions in poorly directed foreign aid programs.

We have seen all this before. We know high spending policies ultimately deliver nothing other than a Greek tragedy of massive debts and a crippled economy.

Phony mathematics infected so many in Labor in recent years — but Leigh almost certainly knows better. Labor’s most economically literate player, Leigh is a former academic who wrote rigorous and thoughtful papers supporting (just to name a couple of biggies) Medicare co-payments and the deregulation of higher education. So how did it come to this? Labor has moved to the left, and its ambitious MPs need to move with it. Its shift to a leadership vote that includes the membership was the tipping point. Leadership aspirants must appeal to the party’s base, which has hollowed out to a small unrepresentative rump, with a strengthening focus on expanding the public sector (and public sector jobs).

The last of the Hawke-Keating crew took flight after the Gillard-Rudd experiment. It is sobering that many, possibly most, ALP politicians now look dewy eyed to Gough Whitlam’s legacy in preference to the legacy of Bob Hawke and Paul Keating.

We should never forget that during the Whitlam years fundamental economic rules were forsaken for a utopian dream to be realised at someone else’s expense. The economic doldrums that followed are conveniently omitted from the history books.

The ideologues and sentimentalists forget that after Whitlam only a leader with strong economic credentials, like Hawke, could win government from Malcolm Fraser — and rightly so. But it now seems that any future Labor leader must bow at the big-spending and hightaxing altar.

New Labor’s central economic assumption is that you can cut the pie differently and it won’t shrink. Tax productive businesses, tax hardworking people, crowd out private sector spending and middle Australia will keep working just as hard and as smart. Like Boxer in George Orwell’s Animal Farm, the aspirational middle class is too busy to realise what is happening to it. Boxer finished up at the knackery. This is lunacy. The economy is not a draught horse that keeps working regardless of the weight saddled on it.

Australia’s long-term prosperity, characterised by high real wages and low inequality, has come from rewarding great people and great businesses, not taking the rewards of hard work and squandering them on harebrained schemes — pink bats, cash for clunkers, school halls and cash handouts to the deceased.

Our success as a nation has come from rewarding clever investment, innovation and ideas. We have sustained high real wages throughout our history by encouraging growth and avoiding a flood of unskilled immigrants which fuels rampant inequality. This is in stark contrast to the US with its early history of slavery and its more recent influx of Hispanic immigrants.

In parliament, Labor has rejected many of the Coalition’s savings without offering alternatives. That leaves them with three options: higher taxes, more debt or alternative options for savings (which seem unlikely given the Santa Claus mindset).

Labor needs to come clean with Australians. Like the southern Europeans, are they simply addicted to debt, pretending that Santa Claus (actually our kids) will repay our debts when the liquidator arrives at the door? Or will they fall back on their favourite trick of massive funding commitments beyond the budgeted years, avoiding altogether the need to make the numbers add up?

For rusted-on Labor supporters, this is heady stuff, straight out of the old Fabian play book. But for hardworking, taxpaying middle Australia, it’s terrifying. Under new Labor they are headed for the knackery.