OnPoint by Keith Ng

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OnPoint: Spending "Cap" is Fiscal Anorexia

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  • Angus Robertson,

    Never have I seen an example of Govt. actually saving money by reducing spending, please provide me with one.

    Greece, Ireland, Iceland, Portugal, Spain.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Graeme Edgeler, in reply to Sacha,

    Wasn’t the agreement last term simply to support it to first reading?

    No. The agreement on this was to send it to select committee with a goal of passing a spending cap into law.

    cf. three strikes, which was a bare promise of a select committee hearing with nothing more.

    Wellington, New Zealand • Since Nov 2006 • 3000 posts Report Reply

  • Graeme Edgeler, in reply to HenryB,

    Graeme, I have been trying – unsuccessfully – to find examples of where it hasn’t had a detrimental effect.

    I'm pretty sure you'll be looking a while to find examples of where this has been tried. It's ludicrously tame as spending caps go.

    Wellington, New Zealand • Since Nov 2006 • 3000 posts Report Reply

  • Sacha, in reply to Angus Robertson,

    If the left had an austerity program of substantial increases in top rate taxation and a steady spending regime, they'd be a choice.

    Instead Labour decided to offer borrow&spend as the preferred alternative.

    Labour offered Capital Gains tax and a progressive tax-free lower band. The Greens went beyond that and proposed rolling back carbon subsidies for polluters who tend not to be the poor.

    Maybe it wasn't communicated well enough..

    Ak • Since May 2008 • 16614 posts Report Reply

  • HenryB, in reply to Angus Robertson,

    The Nats got elected with a program of austerity and this is an austerity measure. Since Labour run on an anti-austerity platform when they get back in the restriction will obviously be lifted, but until then the Nats have a mandate to practice austerity.

    Yes, the Nats did say they would have a cap on government expenditure... but the thing that makes this proposed legislation a bit smelly is their attempt to bind all FUTURE governments to their policy.

    Not quite sure that NZ chose `austerity' either. After all, wasn't the slogan "A brighter future'? Some may enjoy a little bit of flagellation and the wearing of sack cloth and ashes - and where I spent my childhood and youth it was the kind of bright future recommended - but somehow I don't think that this was quite NZers had in mind.

    Palmerston North • Since Sep 2008 • 106 posts Report Reply

  • Sacha, in reply to Matthew Poole,

    Choose not to conduct their business in public quite so much.

    Joshua also noted that the way the CCOs including Auckland Transport were set up by govt did not require their business being public. Len Brown and the Council extracted some concessions beyond that but they can't overturn a legislated culture of arms-length accountability.

    Joyce is making that worse with law changes that tip the balance more towards centralised Ministerial/Ministry control of prioritisation - another casualty of an opposition asleep at the wheel.

    Ak • Since May 2008 • 16614 posts Report Reply

  • Sacha, in reply to HenryB,

    the wearing of sack cloth and ashes

    skimping on the sackcloth - probably NSFW in some workplaces

    Ak • Since May 2008 • 16614 posts Report Reply

  • Ian Dalziel,

    The wizards of Ozterity...

    The Nats got elected with a program of austerity...

    Except I think the Nats think it's Aust here
    (we will catch up, we think we can, we think we can...) but we may well end up as Aust territory...

    Christchurch • Since Dec 2006 • 4877 posts Report Reply

  • HenryB, in reply to Angus Robertson,

    Never have I seen an example of Govt. actually saving money by reducing spending, please provide me with one.

    Greece, Ireland, Iceland, Portugal, Spain.

    In a sense the first is a tautology, but if it isn't going to be that - and I guess the offer of the PIIGS as an example is done in that spirit - then I think it is still too early in this particular exercise in self-mutilation to tell whether it will actually work.

    Palmerston North • Since Sep 2008 • 106 posts Report Reply

  • merc, in reply to HenryB,

    What I clumsily meant was that when you cut expenditure a la Ruth, it may make the books look better for a while but sooner or later you are going to have to spend money on fixing things that simply wear out.
    This can be proven in our case here. Water and electricity lines, and hospitals (Starship needs to be rebuilt already!) spring to mind.

    Since Dec 2006 • 2471 posts Report Reply

  • Matthew Poole, in reply to Sacha,

    Joshua also noted that the way the CCOs including Auckland Transport were set up by govt did not require their business being public

    That's true, but it's also not required that their business not be conducted in public. They could choose to conduct the majority of their business before the public, but don't. They have a choice, and have chosen a continuation of the culture of "the public have no right to know anything unless we tell them" that existed in ARTA. Brown has made it clear what he wants, and the AT board could follow through with that expressed desire from the next meeting.

    The pit from whence crawl… • Since Mar 2007 • 3908 posts Report Reply

  • merc, in reply to Matthew Poole,

    Hell the people of Auckland have made it clear what they want...

    Since Dec 2006 • 2471 posts Report Reply

  • Sacha, in reply to Matthew Poole,

    Why would any organisation do more than required by its enabling statute and real governors? That they haven't bowed to Brown's wishes shows us who is really in charge.

    Ak • Since May 2008 • 16614 posts Report Reply

  • Sacha, in reply to merc,

    Hell the people of Auckland have made it clear what they want...

    A National-led government

    Ak • Since May 2008 • 16614 posts Report Reply

  • Graeme Edgeler, in reply to HenryB,

    Yes, the Nats did say they would have a cap on government expenditure… but the thing that makes this proposed legislation a bit smelly is their attempt to bind all FUTURE governments to their policy

    Parliament binds future governments to things all the time. That's pretty much what Parliament does. The Official Information Act tells future Governments that they are required to release information in a timely manner once requested unless there are good reasons to withhold it. The Crimes of Torture Act (among others) tell the Government not to torture people.

    Parliament telling future governments that they must advise Parliament if they intend to spend over a certain amount of money is something Parliament can do.

    And the major difference from the California property tax rule, and the Colorado budget rule, is that it is within the power of Parliament to adopt a different rule in the future. Just like a future Parliament could change the OIA.

    Wellington, New Zealand • Since Nov 2006 • 3000 posts Report Reply

  • merc, in reply to Sacha,

    LOL, we are sorry, it's about the houses ;-)

    Since Dec 2006 • 2471 posts Report Reply

  • James Millar, in reply to Angus Robertson,

    Well yeah, but the right are the only lot offering austerity so they get to offer their stylings without any competition. If the left had an austerity program of substantial increases in top rate taxation and a steady spending regime, they’d be a choice.

    Instead Labour decided to offer borrow&spend as the preferred alternative.

    NZ chose austerity and it comes with a rightwing government.

    I think the 'National = austerity; Labour = frivolity' dichotomy is totally wrong.

    Cutting the top marginal tax rate and corporate tax rate has reduced our tax revenues (and it's not covered by increased GST); Labour's (and the Greens') capital gains tax would improve revenues.

    Selling state assets to pay for operating expenditure (schools, hospitals, etc) is financially pretty stupid. As other commentators have pointed out, borrowing makes sense in some circumstances - i.e. borrowing money at 5.5% while retaining state assets that pay around ~8% pa in dividends is a sensible idea.

    National's transport policy is a $26 billion barrel of pork dedicated to white elephant highways we don't need to promote a mode of transportation that is increasingly threatened by peak oil.

    While the last term of the last Labour government did see a rise in government expenditure (WFF, interest-free loans etc), government spending as a % of GDP fell during the previous terms, and Cullen spent budget surpluses paying off sovereign debt - ignoring the shrill cries for tax cuts coming from the right at the time.

    I think (and this is really the hallmark of the Key administration*) the thing is that Key seems financially sensible and austere because he's a nice-smiley-rich-man-who-worked-in-finance-therefore-he-knows-what-he's-doing-so-don't-worry-about-it. Psychologists call it the 'halo effect' (i.e. assuming people who are good at one thing are better at others too), while cynics would point out that this government has really proven true the notion that perception is more important than reality.

    *yes, I used that presidential term on purpose - see National's election strategy

    Tāmaki Makaurau • Since May 2007 • 20 posts Report Reply

  • DeepRed, in reply to Sacha,

    Labour offered Capital Gains tax and a progressive tax-free lower band. The Greens went beyond that and proposed rolling back carbon subsidies for polluters who tend not to be the poor.

    And of course, the Holiday Highway to Nowhere.

    James Millar:

    National’s transport policy is a $26 billion barrel of pork dedicated to white elephant highways we don’t need to promote a mode of transportation that is increasingly threatened by peak oil.

    Have you seen my poster? I might have to revise the figure up yet again. And don't forget the $400m South Island irrigation subsidy, sorry, infrastructure investment.

    The southernmost capital … • Since Nov 2006 • 4261 posts Report Reply

  • Graeme Edgeler, in reply to James Millar,

    (and this is really the hallmark of the Key administration*)
    *yes, I used that presidential term on purpose – see National’s election strategy

    That's how it works in a parliamentary democracy too. The Governor-General appoints a Prime Minister with confidence of the House, not a party, and that's the way it has always been.

    Wellington, New Zealand • Since Nov 2006 • 3000 posts Report Reply

  • nzlemming, in reply to Sacha,

    Joyce is making that worse with law changes that tip the balance more towards centralised Ministerial/Ministry control of prioritisation - another casualty of an opposition asleep at the wheel.

    This is a common error in thinking. What Joyce would like is nobody other than the Minister having control (who wants pesky public servants giving advice, anyway?) and him controlling the Ministers to not interfere. He's strictly laissez-faire - the market is all.

    Waikanae • Since Nov 2006 • 2080 posts Report Reply

  • Keir Leslie,

    Parliament binds future governments to things all the time.

    Yes, but a Budget is not an executive thing, it is a Parliamentary thing. So the Public Finance Act can be understood as a way of protecting Parliament's ability to understand and make decisions about proposed Budgets. This proposal is a way of restricting Parliament's ability to make decisions.

    Personally, I am quite angry at this, because the proposed cap flies in the face of all best-practice long term national budgeting rules. It is inflexible, arbitrary, partisan and unaware of the underlying demographic and economic cycles.

    Since Jul 2008 • 1347 posts Report Reply

  • Rich of Observationz,

    Parliament telling future governments that they must advise Parliament if they intend to spend over a certain amount of money is something Parliament can do

    Isn't that why they have to pass a Finance Act every year to give effect to the budget?

    Back in Wellington • Since Nov 2006 • 4447 posts Report Reply

  • Sacha, in reply to nzlemming,

    He's strictly laissez-faire - the market is all

    Not really - the massive preference for funding new highways at the expense of local roads, basic maintenance and public transport infrastructure is a deliberate intervention in the market. The current crop of Nats combine faith-based neolib nuttiness with standard 'daddy knows best' authoritarianism. Worst of all worlds.

    Ak • Since May 2008 • 16614 posts Report Reply

  • Sacha, in reply to Keir Leslie,

    and unaware of

    oh I'd say they know exactly what they're doing

    Ak • Since May 2008 • 16614 posts Report Reply

  • nzlemming, in reply to Sacha,

    Not really - the massive preference for funding new highways at the expense of local roads, basic maintenance and public transport infrastructure is a deliberate intervention in the market. T

    Ah, no, that's standard pork-barrel jobs for the boys, the boys being lots of road construction companies who want long term revenue opportunities. If Joyce had his way now, he wouldn't even have to jump through RMA hoops, and there's less of them than there used to be and they're planning to take a few more out next year. I don't think back-door cronyism counts as actual intervention, in an economic sense.

    Waikanae • Since Nov 2006 • 2080 posts Report Reply

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