Tuesday, August 02, 2005

The threat of Don Brash

Documentary-maker Alister Barry, of Someone Else's Country and In a Land of Plenty fame, has an interesting article up on Scoop about Don Brash's proposed tax cuts. In it, he argues that Brash isn't really concerned about whether the numbers on his tax cut add up, because the entire point of the exercise is to create a "strategic deficit" which can then be used to justify slashing public spending and shrinking the size of the state. Ronald Reagan used this technique in the 80's (the term "strategic deficit" was coined by one of his advisors), and used it to

cut back public housing, food stamps (vouchers used by the destitute in America to pay for food), and welfare benefits. The "strategic deficit" freed President Reagan from having to justify these cuts and their human cost. All he had to do was point to the deficit and explain that the programmes were simply unaffordable.

Similar techniques are being used in the US right now by George W Bush to attack social security (pension) spending, and were used here, by both Roger Douglas and Ruth Richardson, to slash state housing and benefits and make foodbanks a growth industry. And as a committed Revolutionary who has consistently argued that the "reforms" did not go far enough, Brash's natural instinct will be to continue right where they left off, using the same techniques - if not in his election promises, then in his first budget. And that's a threat we should all be aware of.


what you fail to understand is that the motivation for the tax cuts is too boost the economy. Avoiding wasteful spending is a useful by product. would you rather live on the poverty line in the US or be on the average new zealand wage. answer - there is no difference between the two.
The benefit of pain today and jam tomorrow is evident in the vastly rates of growth experienced in the US over the last 20 years.

Posted by sagenz : 8/02/2005 07:15:00 PM

Come on I/S if you want to fight them you should at least understand them as opposed to just demonizing them.

Brash wants tax cuts because he things money in the hands of people is better than money in the hands of the government - he may be wrong but that is what he honestly believes. cutting spending is a means to achieve that ends not the other way around.

Also, there is nothing sneeky about the fact that tax cuts result in lower spending (in the long run) it is obvious.

Posted by Genius : 8/02/2005 10:34:00 PM

Genuis - maybe Brash is genuine, maybe he isn't. How are we supposed to judge? I/S's point remains valid.
Accepting a politician's stated agenda at their word is generally pretty naive. That's effectively one of the points of Allister Barry's excellent docos - that the basis on which the public was (is)sold policy is on what can be made to seem palatable, not on the true agenda.
Eg, the public was rarely if ever told that interest rates were being managed by the reserve bank to maintain unemployment at >5%. The individuals within that 5% were made to feel increasingly responsible for the fact they were unemployed, despite a minimum level of unemployment being guaranteed by the state! If people are rold the true agenda, they make an informed choice.. maybe this is the society they want, maybe it's not.
But in lieu of politicians fronting with their true agenda (both left and right), the best we can do is be appropriately cynical.

Posted by Anonymous : 8/03/2005 08:47:00 AM


You clearly believe that low govt spending as a % of GDP correlates with economic growth.

Okay, lets see the proof.

Because international studies tend to comprehensively fail to find such a link (except for a few strapped-chicken tests). Empirical data does not back up your views.

Oh, the extremes are clear: complete socialism is a bad idea for economic growth, as is complete anarchy. But that doesn't tell us much about the
middle ground, does it?

Empirically, scandivian-style economies with large amounts of tax and govt spending have done just as well (or badly) as equivalent countries with less tax and govt spending.

Posted by Icehawk : 8/03/2005 11:12:00 AM

But actually...

The real tax level is the amount the govt spends. Some of the taxes are just deferred, or paid early.

Which is Brash's problem: like Bush in the US he's selling more govt expenditure on targetted areas, and tax cuts, and promising to magically make it work through "efficiency gains" in other areas and because "there's a huge surplus". Bush completely failed to find any such efficiency gains - and his trillion dollar surplus has turned into a record deficit.

Nor is the US 'starve the beast' approach actually happening: US govt spending is way up under Bush AND US taxes are down... and it's only the fact that US govt pays half the interest rate that our govt does which is keeping this unsustainable pattern going. Now that China has stopped pegging the Yuan to the USD, it's only a question of whether the USD's high value dies with a bang or a whimper.

Posted by Icehawk : 8/03/2005 11:19:00 AM

Oh, sorry, I forgot people won't all realise:

As the US dollar's value declines, US interest rates will go up by a lot. The highly-geared will find that their mortage rates have doubled, and the US govt will find that servicing its huge debts costs twice as much. It won't be pretty.

And Brash is trying to mimic the Americans. God help us.

Posted by Icehawk : 8/03/2005 11:23:00 AM