Thursday, June 30, 2005

Slack budgeting

David Slack has a nice little guide to tax cuts up today, which goes over the numbers and some of the arguments used by the right to justify slashing taxes. And the short version is that they just don't stack up. There's not enough "wasteful government spending" to support the kinds of cuts being promoted, and while the surplus could be spent on tax cuts rather than invested in roads, hospitals, and pensions, that will both drive up debt and leave us with nowhere to go when economic times turn bad (as they are expected to do by next year). What the tax-cutters are promoting, in other words, is not "responsible economic management", but living beyond our means - with a hefty side order of creating a fiscal crisis so as to justify privatisation, smaller government, and (of course) lower taxes for the rich (the Bush-Norquist strategy).

We spent the 70's and early 80's living beyond our means, and the late 80's and early 90's trying to recover from it - and recover from the recovery. Now that we finally seem to have, it would be a mistake to piss that all away. Michael Cullen's great achievement - and one he should be defending, not trying to deny or hide under the carpet - is that our country is now on a sound economic footing, (mostly) able to support the level of public services we expect, and with a structural surplus so that we can both tide ourselves over economic downturns without needing radical cuts, and save for the future. It's an enviable position - compare with the UK's persistant budget deficits - and one that we would be foolish to throw away.

As for the advocates of smaller government for its own sake, I think that most New Zealanders want poor people as well as rich ones to be able to have somewhere to live, something to eat, and to be able to see a doctor when they are ill - which requires government provision for those who cannot provide for themselves. They also want some measure of equality in the fundamental services that provide opportunities in later life, such as education, to ensure that people get a fair chance rather than being constrained by birth or wealth. This is essentially a moral position, not an economic one, but no less valid. A smaller government and freer market may very well be more efficient, and result in greater wealth for those at the top of the heap - but as the US so amply demonstrates, the human cost is simply not worth paying.


I read it. Not impressed. Ultimately his argument is the same old crap about tax cuts raising inflation. That's just not true because it assumes (like most lefties in government) the tax money doesn't represent real worth and productivity. If tax cuts really did bolster inflation to the extent he claims, then any increase in productivity would be cancelled out by inflation. So what would be the point in being productive?

Posted by Blair : 6/30/2005 05:43:00 PM

Conversely, you have a touching faith in the productive investment choices of NZers spending that tax cut money that history does not bear out.

Posted by Anonymous : 6/30/2005 06:04:00 PM

People are so bloody thick nowadays. Tax = money for schools, hosptials, cops, biosecurity, fire brigade, etc. Cut tax, you cut those. Obviously people who want tax cuts are prepared to starve our schools and hospitals of funds to do it..

Posted by Anonymous : 7/01/2005 10:59:00 AM