The final decisions on the last Key/English budget were taken earlier this week. I’m told the cuts are massive, going right to the core of what we value as New Zealanders. But we are not alone. Manny Herrmann of the AFL-CIO writes :-
On April 15, nearly every House Republican voted to give massive new tax cuts to corporations and the rich while demolishing services for seniors, children and low- and middle-income Americans.
This isn’t a budget bill—it’s a political payback bill that raids Medicare, Social Security and education to reward corporate CEOs with massive tax cuts.
Finally seems like the Nats have grown balls to properly address the massive annual deficits of $15b per annum that was the legacy of Cullen. (although made worse by the Christchurch earthquakes. Times are tough and the budget does need to be balanced. The tough decisions now will be to the benefit of the nation down the track. But let us hope the Nats have the courage to dismantle WFF, which was too generous, and holds the country back.
So they are going to ‘destroy the village , to save it’
And when has that worked before?
It is called fiscal prudence and sound policy. The more like the UK we see the better. It is about policies for long term growth and success not populist short term vote grabbing. At long last the NZ voter is getting the importance and need for this sort of platform. #30pointsbehind
In response to Monty and darrenw, I respectfully request that they produce the empirical evidence, based on historical outcomes, for their claims that this slash and burn approach will bring desired outcomes. To aid in this, try looking at the history of the “great depression” and then demonstrate how this ‘fiscal prudence and sound policy’ resolved the huge problems of the time. I look forward to being enlightened. Please also help me to understand how transferring wealth to the already wealthy helps the rest of us improve our standard of living, as in my ignorance, I haven’t seen any sign of this happening over the last 25 or so years of supply side economics.
No balls to reverse those tax cuts to rich though Monty.
Tigger – No – reversing tax cuts would be Labour policy – not the Nats. (also might explain why the Nats are on 56% as opposed to 27%).
Nats want to bring spending under control, not screw the middle classes who are paying for the spending legacy of the Labour Years
In Australia, Julia has made similar plans…
Monty monty monty, your memory is failing, you forget the $120m a week borrowing to enable tax cuts which have no stimulatory effect (known prior to making the cuts).
Monty, you may be right about many things but not about national not screwing the middle classes. They are as screwed as ever and some are beginning to realise it.
Stan – I presume you mean the myth of Herbert Hoover’s fiscal conservatism. David Friedman points out the fallaciousness of it:
As for the example of what Darren or Monty may have in mind I would point out the 1920/21 depression:
It is not fiscal prudence to discontinue spending that improves peoples lives and is shown over the long run to generate a greater return for government than it spends. It pure stupidity like the plan to sell assets that generate more profit per year than the cost of the debt the money from sales is supposedly being used to pay off.
Tracey – Not sure where you are getting you stats from but th etax cuts are not costing the country $6b a year. Where do you get such inaccurate information from? The tax cuts are effectively fiscally neutral.
I am also puzzelled about your claim that the middle classes are being screwed by National. The only screwing is because of the legacy of the Labour Party who went on a massive spending spree (additional $14b extra spending) in their last five years of Governemnt.
What spending spree by the labour government ? They were paying down the debt !
However their last 6 months had a stimulus for the worst finanacial crisis since the 1930s.
English wanted to borrow even more for tax cuts which were rushed through before Xmas and then repealed 4 months later.
Yet each year , Bill English has spent more than labour, but each year has been borrowing more than the total nett debt left by labour…
..each year has been borrowing more than the total govt debt left from 9 years of labour.
Agreed Ghost
Quoth the Raven – you so smart!
Damn right Rob, man this budget sounds creepy.
Monty she said “borrow to enable” tax cuts!
Bleepin disgusting! 
Monty, Labour kept a tight hold on the purse strings.
@Quoth the Raven
http://www.ehow.com/info_8132474_economics-1920s.html
Don’t see any 2.4% in there. And remember, 1920 through 1921 is when manufacturers would be laying off people that had been hired to supply the First World War. Unemployment would be high at that point no matter who was in government.
What’s more interesting from our perspective is what actually happened before 1929 that parallels what we see today:
http://www.huppi.com/kangaroo/Timeline.htm
As I said the other day, this government is following the path that brought about the Great Depression – Laissez Faire market economics and tax cuts on the rich. And those policies will have the same effect especially considering the effects of Peak Oil.
@Monty
No they weren’t. Bill English said they were but they nost definitely weren’t. The tax cuts are costing us $120m per week in extra borrowings.
http://thestandard.org.nz/tax-cuts-for-rich-at-heart-of-debt-problem/
Draco – To claim that this government after economic interventions in everything from banning cold medicines to bailing out finance companies is pursuing laissez faire is to my mind laughable. If only they were pursuing laissez faire policies.
There were no official accounting of unemployment that far back. So it is unsurprising that estimates vary. What is important are the trends. Despite the demobilization of troops and 1920/21 depression with the sharp cuts in government spending unemployment actually fell. Which is the opposite of what many Keynesians would predict. The same is true of the period following the Second World War. Keynesians like Paul Samuelson predicted prolonged mass unemployment. However, it didn’t materialise. From Lowell Gallaway and Richard Vedder’s 1995 Joint Economic Committee Study “The Impact of the Welfare State on the American Economy”:
Monty, can you show me the figures which support the tax cuts being fiscally neutral? At one stage this year our weekly borrowing climbed to $500m a week. For most of this Government’s term it has been around $250m per week. Farrar recently referred to it as $300m a week.
“The annual cost of servicing that debt is expected to double to $5 billion by 2014″
“In the meantime, while rates are relatively low the Government is borrowing faster than it needs to – some $5 billion since June.” October 2009
“Tax revenues over the next four years would be about $16 billion less”
Other things making the Government look better than it is include
“Large one-off factors make the deficit look much better than it actually is. Firstly there were the payments from the Australian owned banks to the taxman after they lost a long running case with Inland Revenue. These total close to $2 billion.
The more recent large factor is the reinsurance payments from the Christchurch earthquake. These are double what was previously thought – $3.56 billion compared to $1.7 billion”
I havent heard any revision from Brownlee or Key over what the earthquake will cost us despite this additional $1.7B we werent expecting?
My understanding is that if the government hadnt cut the taxes we would be borrowing less than we are ($300m per week).
Tax take is down $1b on projections…
The borrowing is paying for working for families, student loans, and various other forms of welfare both past and present. The tax cuts were and are fiscally neutral. The size of the borrowing just reflects the cost legacies of Labour’s past policies and the present needs of crises. This line ‘borrowing for tax cuts’ you people peddle isn’t true, and you did it anyway. As for this facile understanding of Keyne’s, he never proposed anything more then temporary increases in government spending and Labour’s spending increases are permanent. This is not the United States of America. National is a million years from the Tea Party in their fiscal and social policy. I will be the first to disagree with the GOP’s unwillingness to cut defense spending or raise taxes on people earning over $250k. The difference is that here we don’t have a trillion dollar military commitment or more then a handful of people earning over $250k. It is ridiculous, just ridiculous, to try and conceptualise an economy based around a few dozen CEO’s at the top of the pyramid who pay lots of tax hence get more net then lower earnings brackets on tax cuts. If more spending is the answer, why not raise the minimum wage to $20 an hour and borrow $1 billion per week. Why not give students a universal student allowance and raise taxes considerably on people earning $80thousand a year? These are the arguments people will understand.
Cheers
You only have to look at Thatchers time in the UK where Labour had us on a 3 day week, the IMF were involved and the top marginal tax rate was 98%. Thatcher took an axe and the UK had a 10 year boom (with some short term pain). Or Singapore where the government is 18% of GDP as opposed to 47% here and they are now twice as rich as us.
Short term pain under Thatcher? Are you kidding? I was there. The wealth gap increased. Spending on welfare also increased because of the rise in unemployment. Boom for whom? And it set up the reliance on the financial secotr and the specualtive bubble which caused the GFC.
I feel sorry for you being there under Thatcher.
Bad times
@Quoth the Raven
Neo-liberalism is a resurrection of Classical economics – the original laissez faire. What has been found since the early 19th century is that the government has to step in to correct the failings of laissez faire. Over the last couple of centuries the amount of intervention has increased as the failures of laissez faire have become more and more apparent.
Then we’re talking about a conservative government and conservatives have always been the governments that interfere with “the market” more than any other. They’ll talk about free-markets, they pass policy that supposedly promotes “free-markets” and then they’ll drop all of that to transfer taxpayer money to themselves or their rich mates. They’ll make up some sort of excuse to do so but it’s really just a wealth transfer. Your probably saying but that isn’t laissez faire but it is. the people who promote neo-liberalism and laissez faire are the same people and they’re espousing those policies for the same reason – to enrich themselves and to protect that wealth not to make the economy work.
Of course it didn’t, the US was the only effectively industrialised nation left in the world. Throw in the Bretton Woods Agreement which made the US$ the “reserve currency” which forced all other nations to buy it if they wanted to trade and wealth quite literally flowed from the rest of the world to the US which which meant all those returning GIs could easily be absorbed by the economy. It wasn’t until the mid 1960s early 1970s when Europe’s industrial base was rebuilt that the US started having problems – they no longer needed all of those workers.
Big problem with the “free-market” and industrialisation – productivity is so high that it’s impossible to keep everyone employed in weekly double digit hours. We don’t need or want to grow the economy – we need to rationalise it to minimise resource use and to only produce what we need (ie, planning). Having a few rich people prevents us from doing that as they take control of the levers of power and twist the economy to their own ends which is always bad for everyone else.
@Crude
Pure sophistry and wrong anyway. If the tax cuts hadn’t been made then we would be borrowing less. Simple as that.
So far we have seen factual answers in response to requests for why cuts are the right thing and idealogical rhetoric from the left. Anyone want to defend the tax and spend policies Labour propose with facts??
@ darren w. 11.56am
Follow this link to David Cunliffe’s interview on RNZ on Tues 19 April. Should answer your request for facts on what Labour proposes. For a transcript try The Standard, Open Mike 19.4.11,
comment 2.2.1 to 2.2.1111
Draco – What is clear from the twentieth century is the failure of precisely what you advocate, economic planning. The experiments in planned economies from the Soviet Union to North Korea are when compared to market economies abject failures that resulted in great human misery and suffering.
The economic growth that has been brought about by capitalism and the industrial revolution have meant we have seen an immense rise in living standards, increased life expectancy, the raising of the mass of people out of grinding poverty. It has meant that we have banished famine and starvation, once all too common occurrences even in the west, from most of the earth. Nothing is comparable in all human history to the last few centuries of capitalism.
Productivity gains mean workers can produce more with less labour. It’s the difference between a sixty hour week and a forty hour week. I don’t see that as a negative I see that as a positive.
What we ‘need’ is subjective. You know well the problems of economic planning. The impossibility of interpersonal utility comparisons. The impossibility of calculating a priori what is good for society. Remember, I don’t know what you value better than you know what you value. Needs cannot be calculated before the fact because value is subjective and revealed only through voluntary interaction.
If people want to see the continuing demise of poverty around the world then they ought to want to grow the economy.
You admit yourself that it isn’t laissez faire. That it is interventionist. Then you contradict yourself and say that it is. Where’s the intellectual honesty?
Post war western Europe experienced great economic growth. See West Germany for example. The wealth wasn’t “quite literally flowing from the rest of world to the US”, because their economies were growing the whole time. Industrial output in the US continued to grow. In fact since 1975 manufacturing output in the US has more than doubled. Quoting economist Donald Boudreux:
Manufacturing output in the US has been at about 21% of global output for decades. The decline in employment in US manufacturing hasn’t came about because of competition with Europe, but because of technology changes and arguably regulatory burdens.
@Quoth
What is clear from the 20th century is that dictatorships don’t work but that planning does. Corporations plan what they do. The problem with dictatorships is that the people are neither informed nor consent to what is happening which results in passive and active dissent and, eventually, the collapse of the society. Of course, corporations are also dictatorships that are backed by the power of the state designed to channel the wealth to the few but, due to inculcation into the capitalist ownership meme, people don’t realise it.
When I say planning I don’t mean central planning but democratic planning. It’s more complicated and expensive than dictatorship requiring that people actually be informed and have a say but does address the problems associated with dictatorships.
Laissez Faire doesn’t work – period. It will always require government intervention to correct. What I’m saying is that the people who advocate laissez faire/neo-liberalism know this but that they will use the rhetoric of no intervention to hide their planned interventions and that the interventions that they go for is done specifically to enrich the few at the expense of the many – usually by applying more restrictions such as the new copyright bill that National just rushed through.
No, actually, it isn’t. What we need is enough to eat, a place to live, clothes to wear and a reason to live which pretty much equates to something to do which is enjoyable and challenging. It’s the latter two that are subjective – everything else is a physical necessity. The physical costs are what neo-liberal economists continually ignore when they say that the economy is “not a zero sum game” which it actually is.
The economy is constrained by physical limits. There’s no subjective way around that as it’s an objective fact. We are going into an anthropogenic Extinction Level Event due to the fact that people have forgotten that/have been told by the capitalists that it doesn’t apply. Our economy is based upon what we can take from the environment and what we can return to that environment through natural processes. Our streams and rivers are becoming massively polluted because we are taking far too much and dumping it back into the environment in such a way and in such volume so that the natural processors can’t cope.
If we want to see the eradication of poverty then we need to see a massive decline in the human population. The world can only hold so many of us before the destruction of the environment and pollution cause massive change to the climate and we’re far above that number (by about 6 billion).
And productivity has continued to rise. Hell, we were doing 40 hour weeks in the 1840s. Considering the fact of the productivity rises since then why aren’t we now doing 5 hour weeks? The answer is, of course, capitalism as it’s designed to channel all the wealth to the few and so we end up with a few people (less than 1%) who are massively wealthy and a lot of people (about 10%) in grinding poverty. The people who are massively wealthy aren’t, of course, the people who actually produced the wealth.
Draco –
Whether economic planning is centralised or not whether it is dictatorial or ‘democratic’ it is still economic planning. It won’t work. The following is an argument against digitised land entries, but the arguments easily apply to why your ‘democratically’ planned economy won’t work.
We weren’t doing 40 hours a week in the 1840s. If we take the US as an example in the 1800s Americans were often working 70 hour weeks. At the turn of the last century 60 hour weeks. Today it’s under 40. Productivity gains have led to shorter working hours.
Under capitalism poverty has continually declined. Furthermore, those who are in poverty today are incomparably better off then those who were in poverty in century past. The rich have gotten richer, but so have the poor. Everybody is getting wealthier. What you ignore is income mobility. Those who comprise the wealthy and those who comprise the poor is not static. Poor people become and rich and rich people become poor.
That’s not an objective fact. It’s a prediction. One I and many others would argue is wrong.
Here’s a good watch:Are we running out of resources?
You can hunker down in your bunker and wait for humanity’s extinction. I myself am quite optimistic about humanity’s future. When we’re old men we’ll see who was right.
Aside from what duplicitous politicians may or may not say the rest is question begging. You are just making an assertion. Saying something simply does not work period is not actually an argument.
monty you seem comfortable reiterating questionable media generated statistics in favour of the nats but heres a stat that is not as prominent in the media MMP is still by far the most preffered election proccess in NZ
Sleep well Nats
I thought when I wrote that you’d be so pedantic as to talk of biological needs. Beyond that you have to give up the idea that there is some objective narrow set of needs that people want. Most people want to live beyond the level of subsistence. Then who is to decide if they really ‘need’ a computer or an internet connection, a coffee every morning, and so on. Are you going to have a vote on it? Because that sounds absurd. Remember, because it is a very powerful statement, I don’t know what you value better than you know what you value.
Raven
A denier.
Wait and see if the environment is finite?
Cuckoo land.
How close do you think the brink is.
Tipping does tend to panic the market which is causing it.
A bigger slide is happening outside of money matters.
“The economy is a wholly owned subsidiary of the environment, not the other way around”
Productivity has little meaning unless it is linked to its direct usefulness within an environment that can sustain a population.
Making junk and creating unnecessary waste and destruction, only lowers our long term environmental tolerance of resource abuse.
Our “economy” is based on manufacturing obsolescence. The market is sick driven by sick people.
Raven
The rise in material wealth channelled or not. is the outcome of the industrial “revolution” based on portable energy – oil, not capitalism.
Wealth was further increased for the top few by exploitation of labour in various ways including forced labour, captured labour and slavery. All these are antisocial to say the least and involve means of coercion. Fear is a common tool as is buying thuggery and worse.
All alive and well in todays global corporate controlled economy.
Business as usual will as predicted lead to collapse as it is unsustainable. You may wish to argue about details but the evidence of lack of change is pretty obvious. Read your own arguments.
What sort of world do you want your children to live in.