Thursday, May 28, 2009

The Damned if you Do, Damned if you don’t budget


I can only go on what I heard on Newztalk ZB while driving up from Auckland today about the budget.
And at best I can only own up to mixed feelings. Whatever Bill English did, he was bound to upset someone.
This is the dilemma he faced and it is a result of the mess he inherited from Liarbour, added to a recession and global prospects that worsened during the election campaign and afterwards.
So it was obvious National had to break an election promise to someone.
It either broke a pledge to the beneficiary class, or it broke a pledge to the productive class, the workers rather than the shirkers, or National worsened the red ink situation inherited from Liarbour.
Fortunately, Bill English’s improvement in tightening up the financial deficits means that he has been rewarded with an improved credit rating from Standard and Poors and for that he should earn our praise.
But to gain this, Bill English either had to shit on the workers, or shit on the shirkers. Sadly, he chose to shit on the workers, the ones who pay for the shirkers.
That is where Bill English has gone wrong today. He has sucked up to those who contribute little to the economic renaissance that this country needs. He has instead turned his back on the productive sector.
Now, Bill English justifies this in saying people need security, that spending decisions might have been factored in at current benefit levels. Etc.. The same might have been done by the taxpayers who were counting on the last round or two of taxcuts.
Now, the cost of keeping this promise was a mere $900 million a years. Surely, Bill English cannot be saying that such savings could not have been found from somewhere?
I had to smile when I heard Liarbour talking about National breaking its pledge on election taxcuts. How could they say this with a straight face when Cullen cancelled his own chewing gum taxcuts and Liarbour would surely have cancelled any taxcuts it might have promised.
Now, National made many promises in the election campaign. And yes the budgetary position has worsened since then.
One promise it made was not to ‘sell off the family silver’. I heard some chappie on Newstalk ZB saying how National could have done such a thing, say on public-private sector financing of things like roads.
Steven Joyce has announced some wonderful new road schemes and some of these could have been PPPS. They do not necessarily need tolls to fund them. PPPs could have been used to bring the roads now, while allowing the government to maintain debt levels that would protect the credit rating and allow taxcuts. Creative accounting maybe, but one that has been tried overseas and is allowed.
Alternatively, there are a few SOEs, say in the energy sector, that might raise a few billion.
But as English replied to Newstalk ZB, National promised not to sell off the family silver.
But National also promised to cut taxes!
So that is my beef with National and Bill English tonight. The economic mess it inherited from Liarbour meant that an election promise had to be broken and in my view Bill English has chosen the wrong one.
It does seem that National is acting Liarbour-lite. Of course, I am sure the seasoned strategists of the party played the expectations game very well. They seasoned up everyone to expect the taxcuts to go, so when they did go, people are not surprised and may well not blame the government, so its support is maintained.
Trouble is, what will generate the wealth to help us close the gap with Australia, what will kickstart a change in attitudes towards enterprise and create a productive economy. I doubt it is the tinkering here and there that we see from Bill English today.
And this is why I offer National only faint praise today.
I also look at the ideas from Roger Douglas. We have to realise how government spending rose under Liarbour and for little benefit. New Zealand also needs a clean break from the past. We need some kind of vision.
This was a political budget, one that will keep people on side with National. It will miminise the loss of any support to Liarbour.
But that is why , as Roger Douglas says, where it lacks courage. There is not the courage to tackle the deep seated problems in the economy, of too much welfarism. But there again, radical policies, necessary as they are, will only turn people off and perhaps cost National the next election, unless ‘sold’ properly.
However, if we don’t have the budgets that generate growth, how can National go to the voters with a record of success?
I fear part of the problem is our 3 year electoral cycle when it should be 4 years or 5. Allowing a government more time to deliver the economic goodies might allow it to make the brave decisions we need.
Sadly, with the system we have, we see a finance minister have to choose between principle and pragmatism. Pragmatism was the winner and principle was the loser, as was choosing the policies that would have delivered economic success.
I fear that despite their decent majority and their success in the polls to date, National still lacks the courage of its convictions, to deliver what its rank and file want. David Farrar says John Key delivered what he campaigned on, being a centrist, but I feel the crisis we face does justify a shift to the right, and National delivering on its prime policy of taxcuts.
I know there is nothing gained by being pure and being banished back to opposition but I feel the seriousness of the times might well have allowed for more radical and braver action, and there are few things more radical in politics than keeping faith with the voters on your main election pledge!
So I will leave giving Bill English praise for the good news from Standard and Poors and stick for the taxcuts betrayal. I can only hope National can pluck up the courage to be bolder and braver in future. It truly needs to hammer home the message of Liarbour’s failed legacy of the past and how we need a clear break from it, if we are to succeed in future. And that why I feel so let down tonight.

14 comments:

CB said...

Not too upset about no tax cuts.

The lower interest rates are saving me $100 per week in mortgage interest.

Tax cuts would get me about $17 per week by 2011.

I know which one I prefer.

Still should have shafted Welfare for Families though.

Anonymous said...

Was the leak about the insulation an approved leak?

There were really no surprises in the budget which makes me wonder if Duncan Donuts had an unauthorised leak.

Why would the Govt leak it as it was really the only 'good news' in the budget.

Anonymous said...

"a mere $900 million a years."

You really are clueless aren't you? Go away and count to 900 million so you can figure out how much it is (a clue, it's about a million times your net worth).

Judge Holden

mawm said...

I understand 'no tax cuts'. I work therefore I pay, but dammit they could start rolling back the payouts given to people who don't deserve them - WFF, 20 hours, DPB, student loans, welfare to those who have never thought about getting a job.

National have 2 1/2 years to get rid of this bountiful welfarism and turn the economy around otherwise I can see an ACT/Maori/Libz coalition and labour competing to be the next government.

Psycho Milt said...

...National promised not to sell off the family silver.
But National also promised to cut taxes!
So that is my beef with National and Bill English tonight. The economic mess it inherited from Liarbour meant that an election promise had to be broken and in my view Bill English has chosen the wrong one.


He's chosen the one that won't unite the left with the middle against his govt and see it turfed out of office in 2 years time. I don't imagine it was a choice any of them struggled with very much...

Adolf Fiinkensein said...

"The same might have been done by the taxpayers who were counting on the last round or two of tax cuts."

FFM if you think about it for more than two minutes you might conclude that those taxpayers are actually getting more each pay day from a credit upgrade than they would have got from tax cuts. Tax cuts will not stimulate investment in jobs the way a reduction of commercial interest rates will.

A tax payer (avoider) on an $80k salary with an LAQC and a $600k mortgage will gain maybe 2 points on his interest rate. That's $12k per year in his pocket. No way would he get that from tax cuts.

It will take a day or two for the journalistic class to wake up but this budget actually is a political and economic triumph of the first order.

Anonymous said...

It will take a day or two for the journalistic class to wake up but this budget actually is a political and economic triumph of the first order.
and it is precisely what cullen would have done - except for - oh, he'd have capped the insulation scheme at family income of 100K.

Psycho Milt said...

and it is precisely what cullen would have done...

Well, possibly what Cullen would have done, anyway. And? What's your point?

Sally said...

Good post FM

"It either broke a pledge to the beneficiary class, or it broke a pledge to the productive class."

National made the wrong choice, as it is only the productive sector that is able to get this country out of this mess.

CB - Will you save the $83 to pay off principal and your retirement fund? Will you be prepared for the inevitable increases in interest rates.

observer said...

I don't like the idea of paying interest on my tax cuts, so have no problem there. What I would like to do is reduce the ceiling for Working for Families tax rebates from about $160,ooo pa to down around $50,000 per annum.

Anyone out there want to join me in a whisper-the-truth campaign?

Dave Gee said...

You're right. English has pandered to the unproductive members of society who never have and never will vote National, while penalising its own supporters. I don't understand this.

National also has no balls. When Labour began its 9 years in charge, it had no qualms in reversing or removed many of the good things implemented by previous administrations.

Now that National has taken the reigns, it seems to be content to retain all the bad spending and social engineering decisions made by Labour over its 3 terms.

FAIRFACTS MEDIA said...

There are indeed many good things in the budget.
Not contributing to the Cullen Fund is one of them.
But when it came to breaking an election promise, it is unfortunate that Bill English has broken the key pledge on taxcuts.
I still believe the $900 million could have been found somewhere from the spending totals to pay for the main promise National made.
That way, we could have had both the taxcuts AND the credit upgrading from Standard and Poors.
I did suggest some options in the privatisation department.
We should also remember a lower tax burden will generate growth and to some extent taxcuts will pay for themselves.

Anonymous said...

The worst thing about this budget is that it is driven by drivel from Treasury. Its information is already well out of date. Perhaps this is designed to make Kenglish look good in a few months. Typically a National socialist behavoir.

This gentleman has the best continuing analysis of the NZ financial circumstances.

http://www.sra.co.nz/pdf/TreasuryForecasts.pdf

Read then and then ask about the appalling budget bullshit we have just been presented with.

Anonymous said...

What was the point in voting for National? They have broken a key promise (pardon the pun), have indeed pandered to the takers, not the hard workers and seem to have a lot of socialist bent to them. Act has my vote next time, hands down.