OnPoint by Keith Ng

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OnPoint: Everything has changed until 2014

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  • Idiot Savant,

    And to follow up on yesterday's thought: there's no difference between taking money out of the economy through cuts, and taking it out through permanent tax rises. Again, its just a question of distribution. And one of those solutions is unquestionably fairer, distributionally speaking, than the other.

    The government has screwed up its books and created a permanent structural deficit by giving away tax cuts to the rich. Its time they were reversed.

    Palmerston North • Since Nov 2006 • 1711 posts Report Reply

  • George Darroch,

    If we accept that cuts are needed to reduce our long-term deficit, then we need to accept that some of them will fall on things that we consider to be worthwhile.

    The necessity of cuts for deficit reduction is not a premise I accept. There's money around, it's just distributed differently than it was 3 years ago.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Sacha,

    At issue is NZ's total foreign debt (and our refusal to invest in productive export-revenue-earning enterprises to repay it).

    We know the debt is overwhelmingly from the private sector, not the public sector. Ratings agencies have said this country's public spending is acceptable. They are also unconcerned about taking on extra long-term debt to pay for rebuilding Christchurch.

    Please explain how slashing state spending will fix private sector debt levels.

    Ak • Since May 2008 • 19686 posts Report Reply

  • Idiot Savant,

    I feel filthy for supporting this sort of spin doctoring.

    Then don't. Make then stand up and explain their policies and convince us. Anything less is undemocratic, and makes those policies illegitimate.

    Palmerston North • Since Nov 2006 • 1711 posts Report Reply

  • Sacha, in reply to George Darroch,

    There's money around, it's just distributed differently than it was 3 years ago.

    And if we're looking for large amounts of state spending to shift, how about the massive subsidies to ETS polluters, continued propping up of property speculators and top-skewed personal tax cuts that have produced totally predictable results.

    Ak • Since May 2008 • 19686 posts Report Reply

  • Rich of Observationz,

    We know we need to reduce our deficit

    Why? We're 7th lowest in the OECD for government debt. We're in a recession. In a recession, the government should borrow to get out of it (and in a boom, it should pay down those borrowings, exactly as the last Labour government did).

    The only problem with borrowing more is that it might damage the ultra-leveraged speculators who did most of that private borrowing.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Che Tibby, in reply to Rich of Observationz,

    The only problem with borrowing more is that it might damage the ultra-leveraged speculators who did most of that private borrowing.

    you say that like it's a bad thing. would be interesting to know what proportion have based their leverage on rorts like family trust + WFF, or LAQC.

    the back of an envelope • Since Nov 2006 • 2042 posts Report Reply

  • Russell Brown, in reply to Idiot Savant,

    The government has screwed up its books and created a permanent structural deficit by giving away tax cuts to the rich. Its time they were reversed.

    I agree. The government has damaged its revenue base to the point where it can't govern as it purported it would. Which I think is the issue, in a democratic sense.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • Che Tibby, in reply to Idiot Savant,

    The government has screwed up its books and created a permanent structural deficit by giving away tax cuts to the rich.

    to play devils advocate, surely the intention was for this 'forgone revenue' to be transferred to the GST take?

    a grand idea well and truly screwed by the GFC?

    if so, then the revenue will return once the economy picks up. which is, you know, never.

    the back of an envelope • Since Nov 2006 • 2042 posts Report Reply

  • Russell Brown,

    Also, "cuts" isn't a very useful word on its own.

    "Cuts" are about to lead to 75 NIWA staff, including 17 scientists, being sacked.

    Given the extent to which New Zealand's economic future depends on our ability to manage our natural environment and resources, hacking away at NIWA is potentially unutterably damaging to our long-term economic wellbeing.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • Lyndon Hood,

    Frankly, I can't see that they are secretly motivated by long term considerations. I think they were presented with options, including for eg more tax or more borrowing, but "cut spending" was the only one that appealed.

    Wellington • Since Nov 2006 • 1115 posts Report Reply

  • Sacha, in reply to Lyndon Hood,

    I think they were presented with options, including for eg more tax or more borrowing, but "cut spending" was the only one that appealed.

    Totally - it is a choice motivated by ideology and they need to be held accountable for that. "TINA" won't wash. As I said last night,

    And no, the signalled service slashing is not to pay for "new spending" in health and educaton - that's the most basic annual top-up to keep pace with inflation and population changes.

    The economy was already in the toilet before the Christchurch quake, which is just a convenient opportunity for some disaster capitalism. Things may have gone quiet on the asset sales front but that won't last long.

    Also noteworthy that the massive ETS subsidies to polluters and top-skewed tax cuts (which could pay for the Christchurch hit on their own if reversed) are not on the table - lest our pathetic government of yesterday's men is forced to admit that its ideology is wearing no clothes, just like the 90s when they pulled the same shit. Wake up voters. And grow a pair, opposition parties.

    Ak • Since May 2008 • 19686 posts Report Reply

  • Raymond A Francis,

    From Nationals point of view it may seem simple, the money either comes from extra tax from it's key supporters or cuts from Labour supporters
    Simple really
    And when Labour was running the show (during much better times) the question of what to do with surpluses was solved by not dropping tax but by buying votes via WFF and more money to public service
    I feel neither response was the correct one for the time but I don't have to get voted into office

    45' South • Since Nov 2006 • 576 posts Report Reply

  • Sacha,

    From that linked NBR story:

    Mr Key said the Christchurch earthquake had prompted the measures.

    Liar.

    Ak • Since May 2008 • 19686 posts Report Reply

  • Pete Sime,

    Dunedin • Since Apr 2008 • 167 posts Report Reply

  • Rich of Observationz,

    it can't govern as it purported it would

    What amazes me is that otherwise intelligent people actually expected them to.
    "It's time for a change"
    "Labour are corrupt because they made me put a name and address on an election poster"
    "Helen Clark is a CRIMINAL. She didn't tell her driver to slow down"

    Wake up voters. And grow a pair, opposition parties.

    Word. But unlikely to be heeded.

    I think people have managed to disconnect losing a job / not getting a payrise / not getting decent education from the deliberate acts of the government that causes those things. What have the Greeks, Irish and even the British got that we haven't?

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Sacha,

    Some more numbers from Marty at Te Standard.

    So, what’s left after all that locked in spending? And how does that compare to what the other areas of government spending need just to tread water? Yeah, it doesn’t. We’re talking $3.75 billion in real cuts (only a billion of which is due to the quake rebuilding). That means nearly 19% slashed from housing, transport, police, defence, customs, conservation, justice etc etc.

    I did the same thing but assuming the Nats won’t cut transport, and then again this time assuming they also won’t cut police and defence either.

    [intervening table of figures]

    ...

    The cuts for what is left are, of course, even deeper, up to 32% in real terms. Are you happy to cut 32% from the Kiwisaver, and bio-security budgets? No. Well the money has to come from somewhere else then. What about 32% out of state housing? Or 32% out of R&D? Each area you wouldn’t cut means deeper cuts somewhere else.

    The point I’m making is that this isn’t play money. The $3.75 billion in real cuts that Key is planning to make has to come out of the public services that you and I use, directly or indirectly. There’s a reason they call it the social wage – without it we’re poorer and we have to pay money out of our other income to try to cover the costs.

    And what’s sucking all this money out of the economy and firing all those workers going to do to the wider economy?

    Ak • Since May 2008 • 19686 posts Report Reply

  • Bart Janssen,

    If we accept that cuts are needed to reduce our long-term deficit

    Colour me confused. If I read what you are saying correctly you are saying we don't get enough revenue to pay for government spending so we have to cut spending.

    But pardon me for being simplistic here, but couldn't you - like - increase government revenue?

    Serious question what is wrong with taxing more and spending more by the government? In most of the countries where they tax more and spend more the standard of living is significantly better than in NZ. But for some reason we want to emulate the USA, where the standard of living is very uneven.

    I can see why as a political argument taxing less is a winner but are you arguing here as a politician? The argument is particularly good if you only really care about the next election and don't give a rats arse about long term things like education, research, or infrastructure.

    The only argument I can see for not taxing more is that it takes money out of the economy at a time when we probably should have more money in the economy. But if at the same time the government spends more then you shouldn't get that effect and you get the bonus of having the government spend money on things we need rather than spending money on LCDs and houses on Paratai Drive.

    Auckland • Since Nov 2006 • 4451 posts Report Reply

  • Sacha, in reply to Bart Janssen,

    The only argument I can see for not taxing more is that it takes money out of the economy

    Depends who you tax - poorer people spend more of their income; rich ones have other options. Taxes on other than income and consumption have been recommended by experts and ignored by this government. I would prefer to see smart tax changes that incentivise investment in sustainable productive businesses rather than imported cars or a third house.

    Ak • Since May 2008 • 19686 posts Report Reply

  • Sacha,

    Keith, care to discuss the notion of "crowding out" that Key introduced in his Q&A appearance on Sunday.

    JOHN Well, I think we need to take a step back and, say, if you look at New Zealand, it has a number of structural issues it just simply has to front up to. One of those is on the economic front, where we need to rebalance to a more export-orientated productive economy where the Crown doesn’t crowd out the private sector. It’s equally true that both the structure of government and ultimately the structure of the welfare system need reform.

    Is he saying that the champions of the free market can't deliver unless our (average-sized) state sector is hobbled? And how does this relate to poor quality business leadership being a known factor impeding the country's productivty?

    Ak • Since May 2008 • 19686 posts Report Reply

  • James Butler, in reply to Sacha,

    I would prefer to see smart tax changes that incentivise investment in sustainable productive businesses

    The problem with using taxes to incentivise certain sectors, is that it often ends up looking like the old Muldoon-style tariffs and subsidies in reverse: if you target particular sectors too closely, you risk skewing the market and preventing it from doing the one thing it’s actually pretty good at, ie. regulating supply and demand. Look at the US biofuel subsidy regime for a good example of well-meaning “incentives” gone bad.

    Ditching our broken ETS and implementing a properly proportioned (read: huge) carbon tax would be a first big step towards getting the sustainable business outcomes we want, without picking winners too finely.

    ETA: Unless that's what you meant, of course.

    Auckland • Since Jan 2009 • 856 posts Report Reply

  • Lyndon Hood,

    Bill English in the general debate seems to be casting it as part of the long term rebalancing act.

    (Add: so a bit more sympathy from me with those who think Key and English aren't on the same page here)

    Wellington • Since Nov 2006 • 1115 posts Report Reply

  • Keith Ng,

    The government has screwed up its books and created a permanent structural deficit by giving away tax cuts to the rich. Its time they were reversed.

    That's not fair - Labour's last few budgets were to blame as well. Nor is last-in, first-out a reasonable way to decide which policies to ditch.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Keith Ng,

    The necessity of cuts for deficit reduction is not a premise I accept. There's money around, it's just distributed differently than it was 3 years ago.

    There is.

    Please explain how slashing state spending will fix private sector debt levels.

    It won't.

    We don't have a short-term debt crisis. But we do have a structural deficit that we can't afford in the medium term, and an aging population that we simply haven't done enough to prepare for.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Sacha, in reply to James Butler,

    Unless that's what you meant, of course

    I'm not attached to how it's done - just had enough of the hands-off neolib bollocks this nation has suffered under for decades.

    We need smart and high-value enterprises and jobs to attract and keep good people, companies and investors. We need export income to pay our way in the world. We need to pay attention to the needs of the future as well as the present; to what we leave our children and theirs (and yes, that also means assets and debts). These are not things we can keep putting off or meekly bemoaning the failure of the 'free' market to provide.

    I do believe it is reasonable for government to incentivise certain types of business activity over others according to their environmental, economic and even social impacts. I am sure there are ways to do that using consistent regulations, investments and partnerships rather than some laundry list of industry niches or a wink and some pork from Field-Marshall Brownlee or Driver Joyce.

    Ak • Since May 2008 • 19686 posts Report Reply

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