Let’s make this simple
I never fail to be amazed at the brazen attitude of Dr Cullen in that he can suddenly find billions of dollars for last minute spending bribes, yet then turns around and says tax cuts are not affordable.
Most online users are pretty intelligent people and don’t need to have spelt out for them what absolute crap Dr Cullen is spinning, but in case people need to convince some other people, here are some key facts:
* Treasury is projecting a $29 billion surplus over the next four years. Yes that is over $10,000 per family. Incidentally Treasury often under-project the surplus by around $2b a year so this could well turn out to be over $35b.
* National will spend around $9b extra over three years, based on an average $1.5b a year increase. This means in 2009 expenditure will be $4.5b a year higher than in 2006. This is not a cut unless you invent a new dictionary definition. I repeat National will increase spending by an average $1.b a year.
* The difference between National and Labour on spending is that Labour is claiming that spending has to increase at $1.9b a year and National is saying an extra $1.5b a year is sufficient. That $400m a year difference is less than 1% of government expenditure. Prior to Labour taking office expenditure the contingency for new expenditure was $600m a year so National is still allowing a contingency 2.5 times as large as the last National Government.
* The surplus under National will be around 2.5% of GDP. This is larger than what Labour averaged in its first four years, and is larger than most OECD countries. It will more than cover contributions to the superannuation fund. There is *no* requirement to borrow a single cent to cover expenditure.
* A small proportion of capital expenditure will be financed by debt. This is normal practice of almost every government and business in the world. The only exception I can think of is the near monopoly Microsoft which has such huge cash reserves. The extra borrowing to fund capital expenditure is only $3.5 billion over three years.
* Financing capital expenditure purely from the operating surplus is grossly inequitable. For example it means today’s 70 year old pensioner is paying the entire cost of a new motorway which will serve people for 40 years. No-one ever suggested that all capital expenditure should be funded from the operating surplus until around a year ago when Dr Cullen needed a reason to refuse tax cuts.
* Labour’s student loan bribe may well lead to a huge increase in borrowing, which would mean that in fact Labour will have to borrow billions for this additional capital expenditure.
Labour wonders why its scare-mongering is not working (see John Armstrong column). The answer is simple. Because they are bullshitting. They are trying to twist the facts in a way which lacks credibility, especially in view of their own spending pledges. You can not start drinking like an alcoholic in a brewery and then start issuing warnings against excessive alcohol consumption.