Kevin Rudd's schoolyard games amid financial crisis

IF reports yesterday are correct, Kevin Rudd when he was prime minister would hold fake meetings with the "gang of four".

He would reconvene with Julia Gillard and Wayne Swan after finance minister Lindsay Tanner had left.

The reason (apart from out and out childishness): he feared Tanner was leaking. Is that seriously the way the government conducted itself for three years?

During a global financial crisis, while rolling out billions of dollars of taxpayers money for economic stimulus and when it should have been ensuring programs such as the home roof insulation scheme weren't causing the deaths of innocent people, Rudd rather than confronting Tanner directly played games?

I wonder if they also met behind the tuckshop and gave each other Chinese burns during lunchtime? The saddest thing about continuing revelations about the amateurish nature of the Rudd Labor government is that nothing surprises any more.

But what was Tanner's crime that led him to be excluded from Rudd's inner circle -- the gang of three that bypassed the Labor conference, Labor caucus, Labor cabinet and its finance minister?

Tanner wanted to cut more deeply into unnecessary government spending during Labor's first year in office. He had spent the later part of the Howard years railing against the unnecessary spending the Coalition used in order to pork-barrel its way towards election victories.

If Tanner had been allowed to do so, Rudd would probably still be prime minister and Tanner probably wouldn't have thrown his hands up in the air and walked away from a lifetime in politics after only one term as a minister.

Rudd wouldn't support the extent to which Tanner wanted to institute budget cuts because he was fixated on his popularity. Cutting spending might also cut his record popularity ratings.

There is no denying how bloated government was by the end of the Howard era. A pointed milestone was reached in the Coalition's final term when government spending on the public service (heavily cut in earlier years) crept past the dizzying heights it reached during Keating's prime ministership.

Tanner was denied the opportunity to do what should be a right for finance ministers in a new administration -- dispense with the built-up waste of the previous government, thereby allowing the new regime to reconfigure spending to their ideological liking after years in the political wilderness.

Peter Costello and John Fahey did it in 1996; Paul Keating and John Dawkins did it in 1983. Swan and Tanner should have done it in 2007. If they had, the levels of debt that subsequently built up during the GFC wouldn't have been nearly as sizeable (not that debt levels at 6 per cent of GDP are anywhere near the threat to prosperity the opposition tries to make out).

It is not as though stories about Tanner's desire to cut unnecessary spending were not percolating early in Labor's first term. And he had discussed such a need in journalistic scribbling when he was a shadow minister. Nevertheless, Rudd made him finance minister but without the backing Tanner needed to do his job properly.

Swan was never going to take the lead hand -- he was too busy wrapping his head around his new-found responsibilities.

The reason first-term administrations must not put off difficult decision-making -- whether it is spending cuts or long overdue reforms -- is because political capital burns up quickly in modern politics. If belt tightening and economic reform aren't done when significant goodwill towards a new government exists, such heavy lifting may never happen.

Which brings us to the consequence of Rudd's first-term timidity (and the collective timidity of the Labor caucus in letting him govern the way he did): he may have consigned a generation of Labor politicians to a legacy of inaction and failure.

If Labor can't find a way to move the minority government to a reforming position on a raft of policy issues, it must risk an election fighting for ideas it believes in.

The problem at the moment seems to be that Gillard is trying to work out what exactly it is that she wants to fight for. While she does that, the new Finance Minister, Penny Wong, has one hell of a job ahead of her. She must cut spending -- irrespective of what, if any, reform agenda Labor pursues -- because if she doesn't, Labor is unlikely to meet its commitment to get the budget back into surplus in three years time.

That would be political game over come the next election after the way Swan relied so heavily on the forecasts to sell his economic management credentials.

However, BIS Shrapnel has predicted that civil construction won't grow as quickly as Treasury projections claim it will in the years ahead -- not even close. If they are right, the government will find it has another hole in its revenue forecasts to go with the emerging hole likely to be created by the reconfigured mining tax.

Because of political necessity Wong will need to make the sort of cuts to the budget at the beginning of Labor's second term that should have been made in its first term. That means she will be doing so at a time when Labor's political capital has well and truly eroded.

The risk becomes that under such circumstances, too much reform is too politically risky in the eyes of the ideologically void party strategists and the minority government becomes a do-nothing administration.

Budget spending cuts, difficult reforms and a need to reconnect with Labor's heartland and the mainstream electorate are the mix of tasks Gillard faces.

She must also be forward thinking to the extent that she plans beyond this term in office -- courtesy of challenges such as ageing.

That is a lot for a minority government to deal with. It would have been more achievable if Rudd had got things started three years ago instead of playing schoolyard games behind the tuckshop.

Labor MPs should think about that as Rudd continues to work his way around the caucus seeking input on what he did wrong as leader. Wonder what is motivating the former PM to seek out such discussions?