Who pays the piper?

My children are Gen X. They are very concerned that the price of electricity is rising rather rapidly, to the extent that they might have to go easy on the air-conditioning.

I'm too old to be a baby boomer. I am, I'm told, a 'Builder'. On reflection I think that's a good thing to be, and an accurate description.

Control of things in general is passing from Gen X to Gen Y, and neither generation has a lot of respect for us Builders. But we Builders know two things that they don't.

Firstly, There's No Such Thing As A Free Lunch (TANSTAAFL). Secondly, the bill may be deferred, but only for forty years.

The question is "Who pays the piper?"

For the benefit of Gen Y, the instant gratification you apparently desire may not be accompanied by an instant demand for payment, but there is a cost, and it must be paid. The bills you are currently being asked to pay are in large part for services rendered in the 70s, some time before you were born.

You can't really understand the GFC unless you understand the political programs instituted 40 years ago by the Carter administration. That's when it became a good thing to extend credit to people who couldn't be expected to pay the bill.

In Australia 40 years ago, it was time for Gough Whitlam. He initiated a massive change in the way our government spends its income – spending on infrastructure was replaced by spending on social benefits – from about 80% / 20% to 20% / 80%, if you look at the figures. When the Whitlam government collapsed into financial scandal and chaos, we elected Malcolm Fraser to rectify the situation, but he didn't, he exacerbated it. Subsequent governments have carried on the tradition.

Alexis de Tocqueville, visiting America in 1831, wrote "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." Could that possibly apply to Australia?

To pay for all the goodies we were now coming to depend on, new sources of revenue needed to be developed, as tax increases were too unpopular. One good way was to require our public utilities to pay dividends to the government. So they cut back on the money they were spending on infrastructure to pay dividends to the government. The government could blame them for any increases in the price of electricity, water and so on, and continue to buy our votes without any increase in tax.

A very effective political solution! Unless you understand TANSTAAFL and the 40 year repayment rule.

So electricity prices are on the rise! Surprise, surprise. The major element in that rise is the need to catch up on our infrastructure. We haven't been paying much attention to the need for new power stations, have we!

Of course, some bills are presented more promptly. The enormous costs of renewable energy, and the ridiculous subsidies handed out by governments eager to get the green vote, are a case in point.

de Tocqueville also wrote "A democratic government is the only one in which those who vote for a tax can escape the obligation to pay it." We all hope that someone else will pay these bills, but our hopes are obviously delusional – unless you're very rich or very poor.

About 50% of government revenue comes from income tax, and you don't pay your share of income tax if you're very rich and have a good accountant, or you are so poor that you don't pay any tax at all.

Another 15% comes from company tax. Contrary to popular belief, this tax doesn't come out of the pockets of a few rich and greedy capitalists. If companies can't recover the costs by increasing prices, then they can decrease dividends, and you'd be surprised how that affects your super fund. Companies, in the long run, are just collections of individuals, and those individuals are mainly you.

15% comes from GST, and that gets everyone. Of course just because you pay it doesn't mean you get the benefits when it's spent.

Whatever the cost, the people who pay it are the ordinary Joes like you and me. Well actually, being a Builder, I think I pay a bit more than my share, because I'm a self-funded retiree, and it seems that my unearned income is fair game for a government eager for revenue. Gen Y will discover that when they reach my age, when the general welfare becomes more important than the individual.

I have a relative who is a fairly wealthy farmer and grazier. Through multiple companies, he spent a considerable amount on solar panels recently – he reckons it's a terrific investment. I went sailing with him recently, and it became obvious that the owners of waterfront mansions were eager to make this investment. Take a look around your neighbourhood and see who has the solar panels! It's not the poor people!

We can fairly easily identify who benefits from various government schemes for our betterment, identifying who pays is not as simple. AGL is the biggest investor in wind energy in Australia, and they find the business very much to their liking. So do the farmers they pay very handsomely to house their turbines. They couldn't possibly afford it if not for a very handsome government subsidy.

The cost of which, of course, goes straight on to your electricity bill – along with the cost of the very substantial infrastructure costs needed to connect the wind farms to the grid. Then there are the health costs of those who live near the farms, but that hasn't been proven, and so can be discounted.

One of the largest companies in the business of solar energy is BP. It seems ironic that the big end of town so derided by Bob Brown benefits so profitably from his policies.

When you hear your betters exhorting you to be more green, ask yourself who they are asking to pay the bill.

Some bills run up by the government on our behalf have unforeseen (?) and unfortunate effects.

When we express, via the government, our indignation at the way our good Aussie cattle are treated in a few Indonesian abattoirs, the bill is fairly widely spread. Of course the big businesses who should have been keeping a better eye on these things will pay a price, but they'll survive. The wealthy cattle growers, whose exploitation of their animals is also to blame, will also pay a price, but they will also probably survive. But it's all the hangers-on of this evil industry that will pay the immediate price – the drivers, the stockmen, the outback communities.

Some interesting bills will be presented to Gen Y under the 40 year rule. The NBN for example. And solar panels. They will start to cause problems in 25 years or so, when the warranty expires, and I doubt that the government will be over-generous in subsidising their replacement. Heaven only knows what effect that will have on our energy supplies!

Eventually, as every user of a credit card comes to understand, your credit limit is reached, and your supply of easy money runs out. This is exactly what is happening in Greece and a few other EU countries, and we can see how reluctant people who have come to rely on the government to look after them are when it comes to paying the bill. Luckily we in Australia have the mining industry and China to prolong our credit binge.

Being a Builder may mean being old and boring, and I do try not to be too critical of those younger and wiser than me.

But I've been watching a bit of TV lately, and I've been reminded that JFK said "Ask not what your country can do for you, ask what you can do for your country." That's certainly not a fashionable statement today.

And back in Edwardian times, I'm reminded by another show, there was a sense of noblesse oblige that seems to have disappeared, and sometimes I think that we've thrown the baby out with the bathwater.

To end on a really boring note: A long time ago, in my school days, I recall being taught that I had obligations to society, and I don't remember too much talk about rights. I'm still a bit confused when people insist that their rights impose an obligation on me.

There's a price for everything, and the piper must be paid – sooner or later. I'm reluctant to go along with people who don't realise that the price might be our freedom and the hard won prosperity of our nation. Everything that is the legacy of Builders of whatever age and generation.