We all know Budget 2010 was full of broken promises – from NOT raising GST – to being “fiscally neutral” while borrowing an extra $1.1 billion to fund tax cuts - to being “fair” while giving a third of all those tax rebate $ to the top 5%.
Most people now realise that the gains they thought they might get are more apparent than real: the proof – even on the Governmnet’s own numbers average gross incomes don’t catch up with inflation unitl 2014! That’s two elections away!
Most now know the results are economically desultory – the current account blows out to 7% of GDP, growth is static (taking 7 years to accumulate a measley 1% extra), and what empoyment growth there is is largely unrelated to Budget meaures.
What has become clearer as the debate has progressed is just how cynically National has attempted to buy votes through a Budget increasingly seen as highly political. John Armstrong - who is no Labour acolyte to say the least – politely nailed that in Saturday’s Herald.
The game afoot is this: fool middle income voters into thinking they have a win. Push through much larger tax cuts for the upper end under this smokescreen. Deliberately stretch the government balance sheet by borrowing more to fund the cuts. Begin compressing public services, but slowly, and hope the rosy glow lasts until the election…
But Bill English could not help the Freudian slip about selling off KiwiBank. (As if anyone believes that a mom-and-pop share issue would mean shares didn’t end up in institutional hands eventually – remember Contact Energy?)
This is important as a foretaste of things to come: extensive privatisation of assets the public already owns, and deep Budget cuts to balance the books that this Government has deliberately run up by cutting taxes too far. Both add up to shrinking the state, and with it the essential services that all Kiwi families need.
Budget 2010 is not a step change, and not a step up. It’s a set up - a sucker punch for the full flowering of the Right’s agenda should New Zelanders allow them a second term.
Mr Cunliffe, if the way out of private debt is to increase savings, surely you applaud lower income taxes and higher GST?
Lower income taxes give us more in the pocket save, and we can choose to avoid paying more (in nominal terms) in GST by spending less.
What’s unfair about that?
Actually, it’s a symptom of the entire socio-economic system we have called capitalism.
Sean14, more money in the pocket also means that credit card companies and banks are willing to lend you more.
And we know how NZ’ers traditionally respond to offers of cheap money and going into more debt – they embrace them.
As for choosing to spending less – yeah sure if you have enough discretionary income. For a family on the financial borderline spending less means going without a meal or risking having the power turned off. Not really practical.
For further reading…
American capitalism 6.0: The search for a new model
@sean14: Spending less on imported boondoggle, maybe. Spending on locally produced food is quite another thing. The idea of a tax-free threshold at the bottom, as previously mentioned, is worthy of consideration.
And Brian Gaynor had these words of caution despite being positive about Budget 2010.
“This week’s Budget is an important step in that direction but if the tax cuts are spent, rather than saved, and if the savings are channelled into existing residential property, instead of the productive sector, then English’s second Budget will not have its desired outcomes.”
” the whole has greater worth that the individual components ”
I agree entirely. Isnt it the so-called bigger picture we elect our MP’s to take account of, which does make the “what do I get” scenario relatively meaningless in the ocntext of this structure.
For example, Rebecca has mentioned greater individual responsibility and also put forward the scenario of her recently deceased friend who couldnt get herceptin because the rpice was too high. AA cold interpretation suggests her friend needed to sell th ehouse, go into debt or whatever the personal responsibility to raise the money would look like to take care of herself as she saw fit.
Presented with this individual case, her family, children (?) parents the tragic loss of a young life, as is often taken up in the media who amongst us dont have compassion for her situation and wish the “gvt” would help.
The scenario MP’s see includes the other indivudal, or individuals who wont get their life saving care if this person does. The media rarely present the story in this way.
Yesterday Rebecca advocated a greater move toward user pays – a policy ACT has espoused for its lifetime, with 0 tax, until it chickened out and moved it to flat tax 24%. The questions raised are many but include, if we are on 0 tax, or even 24% tax in the ost user pays economy in a hundred years, how does a family of four on $43k pa afford herceptin?
sean14
I guess the conundrum is if in fact, those who get more in the pocket do save it all (and we know most wont) but let’s polay the game anyway, less money is in the economy less revenue collected from GST and “profit”, less new employment, less money for health, education, (I would say police but everyone always agrees we should have more of them, nothing like more ambulances at the bottom of the cliff).
Neither Labour nor National have a perfect answer. I just wish both would stop the rhetoric implying they do. Most recently “everyone is going to be better off”
Tracey – she didn’t have a house to sell and because she was already sick and not working & hubby was on a low wage. By the time she managed to raise funds for the drug the cancer had already spread….
Herodotus: yes family break-ups are probably the single biggest factor that governments continually ignore when projected so-called economic wealth.
But there is only so much a government can do about that as it is obviously a huge social issue and has much wider social consequences re individual choices.
@Rebecca
Personal choice as a political vehicle within the market place is poppycock.
Nobel Prize winning work by Economist Joseph Stieglitz showed that all markets fail. It is up to society through its governance to manage these market failures; where appropriate to ensure social justice.
Absolute Personal Choice has proven time and time again to be bad economics and bad for society.
“What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”
The Wealth of Nations, Book I Chapter VIII
The Adam Smith Institute has just sent out the figures for the impact on capital gains tax collection from raising and lowering rates in the USA since the 1950s. Whenever the rate has been cut revenue has risen – often in the first year and normally in the second. In 1981 the US collected $28.5 billion with a tax rate of 24%. In 1982 they raised $26.95 billion with a lower 20% rate, only to see receipts soar to $37.85 bn the next year and as high as $97.33 billion in 1986.
In 1987 they raised the rate to 28%. Revenue plunged to $59.83 billion. They raised it again to 33%. Revenue briefly rose to $66.23 billion in 1988 then plunged again to $57.3billion, lower than when the rate was 28% and well below the levels when they had a 20% rate.
In 2002 they raised $55 billion with a 20% rate. In 2004 this soared to $78 billion by lowering the rate to 15%. In 2006 they were bringing in $110 billion at the 15% rate.
@DeepRed many thanks for the article reference on American Capitalism 6.0 Excellent and I hope otheress will read it.
@Sean 14 if all tax cuts were saved it would help saaving,ipso facto, but the MPS/MPC balnce alters depending on the income level and needs of the taxpayer – lower income folk spend a higher proportion because they neeed to. Data not ideology is what is needed from Govt.
David,
That article laid out the obvious symptoms, as many do, but did not expose the core cause and certainly went nowhere near a solution.
You implied a while back that their was a surprise coming, I suggest if you have one that you bring it out fast, because incase you havn’t noticed if John Key and his foreign corporate raiding buddies are given much more time to get NZ on the ropes in the corner of rating agency “no choice”, as corrupt as they have proven to be, John Key is smuck when he states they are still worldwide accepted best practice, and nothing is surer than if the international Labour movement doesn’t soon come out vigourously in support of its founding ideals of Monetary, banking and credit system reform, the slave-minded banking elite will tighten their grip even further.
Below statement from Thomas Edison contains cause, symptoms and solution;
Concerning government bonds issued for a construction project Thomas Edison said:
People who will not turn a shovel full of dirt on the project, nor contribute a pound of material, will collect more money from the United States than will the people who supply all the material and do all the work. This is the terrible thing about interest.
In all great bond issues the interest is always greater than the principal. All the great public works cost more than twice as much on that account. Under the present system of doing business we simply add from 120% to 150% to the stated cost.
But here is the point: If our nation can issue a dollar bond, it is capable of issuing a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution, pays nobody but those who contribute in some useful way. It is absurd to say our country can issue bonds and cannot issue currency. Both are promises to pay but one fattens the usurer and the other helps the people.
If the currency issued by the people were no good, then the bonds would be no good either. It is a terrible situation when the Government, to insure the National wealth, must go in debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold. Interest is the invention of Satan. — Lightning Over The Treasury Building, by J.R. Elsom
David,
Investment banker Rob Cameron who is currently heading the capital markets taskforce is currently a commissioned junior affiliate of Rothchilds international. Rothchilds were one of the original private designers and instigators of the monetisation of national money supplies as debt created out of freshair and loaned at interest, it is little wonder and a great conflict of interest, that local govt have now been given with The Securities (Local Authority Exemption) Amendment Bill, the same ability as the national govt to issue debt bonds and exchange for created credit with interest attached without having to advice their electorate just who they are dealing with. The words of one of the sons of the original founders of the scheme written in 1863 could not have turned out to be any truer:
“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.
Add to above the process of securitisation that exponentially expanded created credit beyond what was real and any physical ability of it to ever be repaid as explained in the most informative easy to comprehend video below, and blind Freddy must surely even start to get the picture:
http://crisisofcredit.com/
Add to that our the next video below explains just why a money supply monetised by private bankers as debt created out of freshair and issued as a loan with interest attached is collectively unpayable by mathematical formula:
http://www.youtube.com/watch?v=rxo_XPdpI_s
It is then time David, that is if you are not so interested in its profits or be so dependent upon its favours, to stop wishing this crime against society had not become so obvious on your watch and set about doing something about it before it is to late.
Apologies to those who don’t have broadband.
I am pleased to see Shepherd on the new Board.
Oh dear, take the time to add compelling historical evidence to debate(posts above) and what do you get, another wall of silence.
You can continue to bury your head in the sand as much as you wish, sad fact is when you pull it out again the approaching danger that scared you into putting it in the ground in the first place has only got closer due being unchallenged.
Lots to fear, nothing to lose and everything to gain, is their someone of the courage of John A Lee among the current Labour movement ranks, if not were screwed!
You cant regain the mantle of champion of the people without first telling them the truth of what the real threat is.
I once again apoligise to those without broadband, I include a link below from a gentlemen who has become one of the worlds most respected educators re the international monetary system, his crash course in money should be compulsory veiwing for every MP:
http://www.chrismartenson.com/page/crash-course-one-year-anniversary