Wednesday, April 04, 2012

The strategic deficit

When national introduced its "tax switch", they claimed it would be revenue neutral. Higher taxes on ordinary kiwis would make up for the billions they were giving away to their rich mates, and so they wouldn't have to borrow or cut to fund them.

The reality is a bit different:

The government took in less revenue than expected from income tax, company tax and GST in the eight months ended February 29, widening its operating deficit more than forecast.

The operating balance before gains and losses was $5.5 billion, or $395 million higher than forecast, the Treasury said in a statement.

While core Crown expenditure was $1.4 billion below expectations, that was offset by core Crown revenue being $1.2 billion below its estimate.

The government's three main tax types continued to run below forecast in the first eight months of the year, the Treasury said.

The fact is that National's tax cuts devastated the government revenue base, forcing more borrowing. And this is just more data proving it. And yet National continues to call themselves "good economic managers", and paint Labour - who consistently kept the books in order and ran large surpluses - as being feckless spendthrifts. Which turns reality on its head. After three years, its clear that National couldn't manage a pig farm. Their outdated NeoLiberal ideology and insistence on putting their cronies first means they are driving us further into debt. As for their "plan" of a return to surplus by 2015, that's looking more and more like a pipe-dream, supported by heroic assumptions about record wage (and therefore tax) growth in a time of high unemployment. But its already clear that things just aren't panning out that way. Sadly, the result is likely to be National trying to cut its way to growth - and thus deepening the recession with more austerity - rather than admitting they were wrong.