It would be a harsher, less caring world, where daily life was more cut-throat, where the gap between rich and poor widened more rapidly and where the proportion of households falling below the poverty line increased every year. Ah, but think of the advantages: we would have fixed the budget problem and started getting the public debt down without having to pay any more tax. And that’s not all: we’d be left with a much more efficient economy. Are the report’s proposals the product of self-interest or ideology? Fair bit of both. To oversimplify, the business people would be motivated mainly by self-interest. They don’t tend to be big on ideology – at least, not the sort that’s internally consistent. The economists, on the other hand, would be driven mainly by ideology. When you study economics you’re taught a simple model of the way the economy works. It’s supposed to be just a useful analytical tool, but it tends to take over the thinking of those who get jobs as practising economists. Those who become convinced the simplest version of this ‘‘neo-classical’’ model holds an equally simple answer to most economic problems, come up with policy recommendations just like those in the report. The self-interest in the report is easily seen: it would fix the budget problem – and, don’t be in any doubt, there is a problem – by taking money from low income-earners and middle-income earners, but not high income-earners.

The report fits perfectly with a wry observation from John Kenneth Galbraith, as paraphrased by the late John Button: ‘‘The rich need more money as an incentive and the poor need less money as an incentive.’’ But if you want to understand the ideology behind the report – what prompted the economists on the commission to advocate the harsh measures they did – you need to know a little about the strengths and weaknesses of the simple neo-classical model that fundamentalist economists take as their infallible guide. It assumes that pretty much all you need to know about the economic dimension of our lives is that markets work by allowing prices to adjust and thereby bring the demand for and the supply of particular goods or services into balance. Except in rare cases, the main thing that would stop this process keeping the economy in balance and working well is government meddling in the market. So the model predisposes those who take it literally to believe the less governments do the better. Government needs to be as small as possible, so if government spending exceeds its revenue from taxes, the only acceptable answer is to cut spending to fit. To solve the problem by increasing taxes would damage the economy. The model is built on various assumptions. One is that all of us are ‘‘rational’’ (hard-headed, with perfect self-control), so we don’t need governments stopping us doing destructive things (such as smoking or becoming obese) or even using payments to nudge in the right direction. Indeed, we’d all be better off if governments gave us more freedom (and thus didn’t need to make us pay so much tax).

Two other key assumptions are that we all operate as individuals and that what makes the economy work efficiently is competition between us. So the model casts aside the possibility that we’re social animals who identify with groups and like acting in groups, even groups as large as ‘‘the community’’. Nor does it have any place for the possibility that sometimes co-operation between us gets better results than competition between us. It assumes the notion of ‘‘shared responsibility’’ – of using the budget to require the well-off to subsidise the less well-off – could only discourage the poor from standing on their own feet and so make things worse on both sides of the deal. This explains why the report’s main savings come from making even tighter the already very tight means-testing of access to government benefits. It would abandon Medicare’s most fundamental principle of universality – treating everybody equally and paying for the system via general taxation – to introduce co-payments and means-testing. The model further assumes that the more aspects of our lives that are run on market principles the better off we’d be. So it advocates greater competition between public and private schools, public and private hospitals, private health funds, universities and private education providers (as well as among big and small unis) and between rich states and poor states (South Australia and Tasmania). It’s change that would move us from one person, one vote towards one dollar, one vote. For those of us who have lots of dollars, what a paradise it would be.

Ross Gittins is economics editor. Twitter: @1RossGittins