Wednesday, September 14, 2005

Macroeconomic choices

And we have more from Public Address: Keith Ng has a backgrounder on the macroeconomic issues behind the election - on whether National's tax cuts are affordable. The short answer is that they are, but the money will come from somewhere. What the tax debate is about, then, is choice - whether we want tax cuts at the expense of spending cuts and more government borrowing, or whether we want secure and well (or at least not grossly under-) funded schools and hospitals.

That is of course taking National at face value. And given their inflated claims about the savings that can be made by "cutting bureaucrats" (see education for an example) and general vagueness about where exactly the money will come from, I'm not sure that we can do that - especially when they're making uncosted spending promises in several areas (work for the dole, school bulk funding) and engaging in outright fuzzy maths about the costs in others.


Five reasons to just say no to tax cuts:

1. They don’t stimulate long run economic growth - or, at least, there is little empirical evidence to suggest that they do.
2. In lieu of this Tax cuts = service cuts.
3. Tax cuts = higher interest rates.
4. Tax cuts give money to those who don’t actually need it and lead to greater inequality.
5. Now is not the time – an aging population means increased health care costs and increased pension costs and there’s only one (sane) way to pay for this - taxes.

I've tried to outline this in more detail on my weblog.

Posted by Terence : 9/14/2005 12:23:00 PM