The secret mini-Budget

October 15th, 2008 at 8:58 am by David Farrar

The Herald starts to ask the obvious questions about Labour’s planned mini-Bduget for December – how much will it cost?

Labour will not reveal how much more taxpayers money they will spend. Labour won’t reveal how much more debt they will incur. And Labour won’t reveal how much they will increase taxes by to pay for it.

You could understand an Opposition newly elected to Office doing a mini-Budget once it finds out how bad the books are. But Labour is in Government – it has daily updates from Treasury and the Reserve Bank if necessary.

Labour had previously accused National of three things

  1. A secret agenda
  2. Uncosted policies
  3. Increasing debt (Clark said it was “mind-boggling stupid” to do so)

We now know that it is in fact Labour doing all these things. They are refusing to give details of some of their spending plans or tax increases (or rule them out), saying we will tell you after the election.

They are making promises (such as superannuation) that have not been costed (the media are having to do it for them).

They are announcing spending bribes everywhere, despite a projected decade of deficits. EIther debt will skyrocket or they will have to put tax rates up. They are incapable of trimming existing Government spending.

Sensible guarantee scheme but what is the secret agenda?

October 13th, 2008 at 7:53 am by David Farrar

The decision by the Government, backed by National, to guarantee bank deposits is sensible in the current climate, and really just brings us into the international mainstream.

It will also cover finance companies, but not the ones that have already collapsed:

It applies to finance companies that take deposits but is not retrospective, so it will be of no comfort to the thousands of investors who have lost money in collapses.

There is a valid argument that a government guarantee encourages more risky behaviour, but I think there has been so much of that behaviour regardless, that is less of an issue.

Helen Clark said a mini-Budget would be produced in December if Labour won the November 8 election.

Amazing – the biggest secret agenda of them all. We will announce our response to the financial crisis – after the election!

It is easy to conclude tax cuts will be cancelled (they will call it a delay) at a minimum.

Where are the policies and the candidates?

August 15th, 2008 at 1:58 pm by David Farrar

If you go to the National website, you will see an easy link to the 24 new National candidates, and a policy section which now has over two dozen (and growing) policies listed.

Now look at the Labour website. It doesn’t have a single 2008 policy listed, and nor does it include details or even the names of a single candidate who is not an MP.

On the policy side, of course some of their policy is what they are already doing in Government. But nowhere do they have a single policy summary of what they will do if re-elected in a particular area.

And if you want to know who your local candidate is, they don’t even tell you their name, let alone contact details. Luckily for Labour, I have my own candidate’s list so people can find out about them.

The current Labour website is seemingly 100% taxpayer funded, so they presumably feel they can’t put election policy and candidates on it. But if that is the case, then shouldn’t they have a second website for the campaign? We are now within three months of the last possible date, and they don’t even have a list of candidates available.

And if you want to know what Labour will do if re-elected? You need to go to 25 Departmental websites to find out, or read Dr Cullen’s Budget speech. And even that only tells you what the Government is currently doing, not what else they are promising to do if re-elected.

So next time Labour goes on about secret agendas and secret policy, ask them when they will have even a single 2008 policy statement on their website, let alone the names of their candidates?

Blog Bits

August 8th, 2008 at 2:47 pm by David Farrar

Four interesting blog pieces – all from “professional” journalists also. First off is Nick Stride, editor of The Independent:

Deputy Prime Minister Michael Cullen was on even shakier ground when he tried to paint National leader John Key’s debt raising and infrastructure investment strategy as a ruinous policy designed to hide borrowing to fund tax cuts.

If memory serves, it wasn’t so long ago Labour was attacking National for the speed with which it was pushing national debt levels down to 30% of GDP.

Now it’s on the attack over plans to lift that ratio from 20% to 22% a rise so insignificant it will barely register at the sovereign rating agencies.

The fact is, New Zealand ranks high among OECD countries in terms of its debt-to-GDP, and in the bottom half in terms of its infrastructure. It therefore makes perfect sense to allow the two to come a little closer together, to everybody’s benefit.

It’s true, as Vernon Small points out in his column on page 24, there’s no free lunch; the extra debt envisioned by National will have to be serviced, reducing the amount government can spend elsewhere.

But it’s not a zero-sum business in which a dollar spent on infrastructure is a dollar that must be taken from health or education. According to research conducted in 2004 by Macquarie Research Economics, every 1% rise in infrastructure spending can be expected to lift GDP 0.5%.

This is what the debate should be about – whether the return on the capital and the interest on borrowing is a good investment – will it lead to higher economic growth. Instead we have had a near Taliban like mentality – that any extra borrowing is madness and Muldoonism.

The Dom Post’s Vernon Small also blogs on this issue:

Yes, National’s plan to increase gross debt to 22% of GDP is conservative. But maintaining it two percentage points above Labour’s target does bend the party-political continuum.

Since when did centre-right parties run a looser fiscal regime than centre-left ones?

It is somewhat ironic. My non serious answer is since Labour started believing in tax cuts. My serious answer is that centre right parties see a difference between borrowing and expenditure on social spending, and borrowing for expenditure on capital works.

No, National cannot credibly say it is raising $750 million in borrowing only for infrastructure and not for tax cuts. Residual borrowing is the net impact of a complete revenue raising and spending programme, though there are good accountability reasons why politicians should explain how new programmes affect the mix.

Finance Minister Michael Cullen is also happy to let debt rise over the next few years, driven by a tax-cut programme. So it is a relativist, not absolutist, debate. They may as well argue they are borrowing to cover the impact on government revenue of the current recession.

Yes if National is borrowing for tax cuts, so are Labour. As I did a long winded post on last weekend, you have a current account and a capital account, and the cashflow funds both those things.

He isn’t a blogger but Keith Rankin writes in support of infrastructure spending:

Helen Clark and Michael Cullen are describing National’s proposal to borrow in order to fund infrastructure projects “incredible”, meaning foolhardy and irresponsible. (“Key unveils plan to borrow, PM dubs it ‘hilarious”‘ – NZ Herald August 4, 2008.) All Clark and Cullen are doing is showing how out of touch they are with economic reality.

Financial crises happen when lending slows down significantly in financial markets. The problem usually is a lack of credible borrowers. This is precisely the time that borrowers such as governments funding infrastructure need to step up to the plate.

Governments need to spend more and borrow more precisely when the private sector is spending less and borrowing less. This was the most important lesson of the Great Depression in the 1930s.

Ben Thomas writes on the so called secret agenda:

All of which is a roundabout way of saying the scandal that did erupt – the audio files of English and the Smiths, Lockwood and Nick – was outrageously overplayed by the media and National’s parliamentary opponents.

The story was as follows: an unknown person, who claimed later to be unaffiliated with any political party, attended the Friday night social event posing as a National Party member and engaged the three senior MPs in conversation around left-wing touchstones: state ownership of Kiwibank, nuclear power and Working for Families.

The conversations were recorded and played on the broadcaster as evidence suggesting that National had a “secret agenda.”

Fine. Except the recordings disclosed no such thing. They were evidence of absolutely nothing except a slightly looser verbal style than MPs would present in a formal media interview or Parliament. This is a story about language.

The Smith & Smith conversations especially were hyped up massively. They were quite unexceptional.

At it’s most basic, there is syntactic precision: there was little effort made in the media to differentiate a secret recording of a conversation (as in this case) from a recording of a secret conversation (which may have yielded something much more interesting).

A useful point.

English conceded he would eventually prefer to sell off Kiwibank “but not now.”

In fact absolutely nothing in English’s comments was inconsistent with National’s declared policy. Lockwood Smith was accused of revealing the hidden agenda when he said “Once we have gained the confidence of the people, we’ve got more chance of doing more things.”

He even said, “We may be able to do some things we believe we need to do, perhaps go through a discussion document process – you wouldn’t be able to do them straight off.”

In other words, National may have a secret plan to, er, consult with the community and gauge public opinion before implementing new policy.

Yes, how a public policy consultation process is proof of a secret agenda, I do now know.

The reality is the secret agenda meme is all about trying to associate a negative brand with a party. I will touch more on this next week, but is is the equivalent of the “Have you stopped beating your wife” question.

There is a very relevant example of a major political party in government pursuing a deeply unpopular policy in the face of public opposition, and refusing to abandon it despite repeatedly being told it is not what voters want. It is the Labour government’s push for state funding for political parties.

Labour has never campaigned in an election on this policy but it is a fond wish of the prime minister and her party.

It’s also a policy that is widely detested by the public, and has been soundly rejected every time its prospect has been floated either through official comments or strategic leaks.

Labour’s secret agenda for state funding – indeed. They don’t have the guts to make it a manifesto promise, because they know it is as popular as anthrax.

Finally back to Vernon Small again, who asks where the dividing line is between bloggers and journalists, with the catalyst being my accreditation as media at the National Party conference. It is an interesting issue (especially to me), but somewhat academic. This is the fourth or fifth National conference I have attended as media. I’ve also been in budget lockups as media, attended tax conferences, spoken on media panels at media conferences, and get invited to cover conferences and seminars on a very regular basis.

I’ve commented over on Vernon’s blog on a couple of issues he raises.