Sunday, November 20, 2005

Treasury and tax cuts

Terence of Long Ago and Not True Anyway has an excellent post on why Treasury’s got it wrong on tax cuts querying their claimed "[rich] body of international studies" in support of their policies. It's well worth reading - but while I'm on the topic, there's actually a bigger problem with their advice, in that it fundamentally oversteps the boundaries of Treasury's role as public servants. Tax rates, the overall size of government, the ownership of state assets and whether we should keep our international commitments are not technical questions of policy implementation - they are questions about policy direction. They should thus be decided by elected politicians, not unelected technocrats. Treasury has a role of course in pointing out the costs and benefits of the chosen course, but if they want to decide that course, they should be standing for Parliament and winning a mandate for their policies, not trying to impose them by stealth from the safety of the public service, where their mandate is never tested (or rather, tested by other people on their behalf).

What people like Don Brash and John Key are saying is that they think the country should be run by Treasury. In which case you really have to wonder what they think Parliament and elections are for...


What this saga really shows is that citizens don't matter a damn to the ruling elite - the "business community" and the higher echelons of the bureaucracy. Treasury have behaved like an ACT think-tank for years and continue to peddle new right economic bullshit that is nothing more than taking from the poor to give to the rich. Enough.

Posted by Anonymous : 11/20/2005 03:45:00 PM

Treasury comes to conclusions baised on the evidence that they have and the tools that htey have - it is therefore rational that they would suggest the sort of things that they suggest.

The real difference is that other people use different tools and dont care about the same things.

It is still smart for a government to take their advice under consideration since they represent the experts at using the tools that they have even if we decide we will ignore their data in the end.

LOANTA brings up some interesting information on potential cross country analysis etc and is rightfully cautious about his own conclusions but it is good to start looking at it from this angle.

Posted by Genius : 11/20/2005 08:03:00 PM

It strikes me, having read part of the report, that they've produced a highly prescriptive document, based on one narrow strand of economic thinking. What's more, it's hopelessly naive in proposing a course of action diametrically opposed to the platform the government just got elected on.

Apart from anything else, it strikes me as a complete waste of public money producing a report like this - I'd expect a balanced discussion of possible policies and the likely impacts, taking into account the range of opinions held by different economists.

If I was Cullen I'd make the whole of Treasury re-apply for the jobs, with a caveat attached to their job description that they are "expected to give expert and balanced advice to governments of any political hue". Those that don't want to do this can go and become ACT list candidates or whatever.

Wouldn't happen because this government is unaccountably in awe of public servants.

Posted by Rich : 11/21/2005 02:55:00 PM

And because Cullen can't. Employment decisions are very carefully kept out of the hands of Ministers, precisely to prevent them from politicising their ministries or awarding jobs to their mates regardless of talent.

But you're right, it is a narrow and prescriptive document. it seems the "tight prior" is still alive and well on the Terrace.

Posted by Idiot/Savant : 11/21/2005 03:07:00 PM


I think you're bang on teh money about tresury ignoring the trade offs.


I'm curious: what does "tight prior" refer to?

Posted by Terence : 11/21/2005 03:27:00 PM

It's a term used by Brian Easton in The Whimpering of the State (among other places) for the extremely rigid a priori framework which dictates policy and is never questioned no matter how disastrous the results. Hence we see people from Treasury, the BRT and ACT reacting to the failure of "reform" with calls for more and harsher "reform", rather than questioning their assumptions about what works and what doesn't. Treasury is a slave to the tight prior, and has been since the early 80's.

Posted by Idiot/Savant : 11/21/2005 03:47:00 PM