Waikato University scientist, Dr Pawel Olszewski suggests sugar and fat may produce changes in the brain which resemble the effects of addictive drugs. This may have a profound impact on the way governments, health practitioners and communities plan to combat the impact of the growing incidence of obesity.

We must be careful, though, not to directly equate sugar and fat, which our bodies need, to nicotine, alcohol, THC, amphetamines etc which we can quite happily do without:

Dr Olszewski says that while the brain responds to tasty foods in ways that have a lot in common with its reaction to drugs, he stresses there is a clear distinction between the complex mix of substances found in foods and a single compound such as morphine or nicotine. For this reason he describes over-eating patterns as “addictive-like”.

“We don’t want to send the message that if you’re eating a sandwich, that you’re consuming a drug. However palatable, high-sugar foods very often increase activity of the same brain circuits that are involved in the creation of the addictive state.

“So we believe this addictive-like behaviour stems from the effect that nutrients, in particular sugar and to some extent fat, have on the same set of brain areas that drive addiction.”

Immediately one can see the absolute pointlessness of a sugar tax. Potatoes, white bread, rice and pasta become sugar in the body as fast as pure cane sugar and nearly as fast as glucose powder. Taxing sugar is like sticking your finger in the dyke when the tsunami alarm has just gone off. And taxing carbohydrates in general is just adding a tax to nearly all food.

all that causes obesity is taking in more calories than you burn up.

Add to the mix research released from Ohio State University this week that shows the attachment between mothers and toddlers is linked with incidence of obesity and you quickly get the picture that obesity is not straight forward and solutions will be neither singular nor simple.

Obesity is a significant driver of the increasing cost of healthcare and therefore cannot be ignored. Developing prevention and treatment strategies is the responsibility of governments as much as it is the responsibility of parents, communities and individuals.

These changes are not ‘envy-tax’ but a way to ensure that tax-systems are fair. Many have seen these changes as wake-up calls for billionaires and millionaires to pay their fair share.

Barack Obama has just unveiled changes to the US tax system which aims its tax increases at the wealthy. These changes include the ‘Buffett rule’ which ensures that no households earning more than one million a year pays a lower average tax rate than ‘middle-class’ families do.

The reason it is called the ‘Buffett rule’ is because Warren Buffett has cited in the past that despite being a billionaire, he pays a lower average tax rate than his secretary.

Barack Obama was quoted in the September 24 issue of Economist Magazine as saying that tapping the rich to close the deficit “is not class warfare but math”.

What does the Buffett rule tell us? I think two words come to mind: Math and fairness.

It’s not often that I agree with Deborah Coddington, but I do today.

…muggins like me who stick our savings in the bank have to pay resident withholding tax and can’t escape it. That’s why, in principle, a capital gains tax, as sold to me this week by Labour’s revenue spokesman Stuart Nash, is hard to argue against. If you earn a buck, you pay tax on it. Taxation should be fair…

While Coddington doesn’t agree with a progressive taxation system (ie. the more you earn, the more you contribute), she does take aim at those who have become excessively rich at the expense of others:

The more I see the fiercely wealthy, the more I dislike them. Are they born unpleasant or do riches change them because they’re accustomed to sycophants hanging on every whim? … they’re terrified of losing their money, and becoming grasping and predatory. They fear everyone is out to take it away so they must increase their pile … Rich isn’t a dirty word, but these guys’ refusal to accept they’ve done wrong gives everyone in business a bad name.

I admire people who have worked hard and made a good life for themselves and their families. But I’ve got no respect for those who make huge piles of cash by ripping innocent people off, then stash it away in family trusts and try to pretend they can’t even afford lawyers to defend themselves. They’re rip-off artists, plain and simple. Ambition and hard-work should be rewarded, greed should not.

John Armstrong’s column in the NZ Herald notes that Labour’s policy is driven by a desire to do the right thing and get the economy moving again, unlike National’s approach of trying not to scare the horses by doing nothing:

National concedes that Labour’s promotion of the tax was always going to get the tick of approval from some economists, think tanks and academics. National did not count on that endorsement being so strong. The endorsement has come from across the political spectrum, thereby making Goff’s push for the tax look less political and motivated more by what might be in the national interest.

Over on Stuff, Andrea Vance argues that Labour has taken the lead:

…Labour has seized the moment. There comes a tide in the affairs of politics and this time Goff, Cunliffe et al have caught it…pitched against an asset selloff, a CGT looks to many like the lesser of two evils…

On TV3’s The Nation Colin James says that Key and National have “miscued”:

They’ve attacked things that aren’t in it, and attacked things that are in it that they said aren’t in it, and John Key talked about it being a ‘dagger through the heart of the economy’ and I thought Russell Norman in Parliament was able to skewer him on that, he quoted the OECD, he quoted the Treasury, he quoted Australia, and I think National just miscued, it didn’t handle it nearly as well…

Earlier in the week, Rob Salmond posted an interesting piece on Pundit correcting some of Key’s mythical claims:

If John Key is determined to measure a person’s welcome in New Zealand only through tax rates, then the conclusion is clear. High income earners are more “welcome” here than in any of the country Mr Key aspires us to be like… The CGT discussion so far has been a bit surreal. Labour starts a debate about tax policy, traditionally a strong area for National and ACT. In response, National becomes a fact-free zone and ACT retreats into an internecine war over the appropriate degree of their race-baiting.

Blogger Idiot/Savant at No Right Turn, often critical of Labour for not being bold enough, nails it:

The numbers stack up. This is not a spendthrift plan to just keep on borrowing. Instead, its a cautious, sensible, fiscally conservative plan to balance the government’s books by closing a serious tax loophole. And we don’t have to sell anything to do it. Labour is now presenting a clear alternative to the government’s policies: either we can sell the family silver and see the profits go offshore, while trying to cut our way out of recession – or we can pay off our debts and support our government services by making the wealthy pay their fair share. Put like that, its really a no-brainer.

Meanwhile Fran O’Sullivan questions whether John Key has the gravitas to deal with the challenges we face:

All New Zealanders know Key has fulfilled his childhood dream by becoming Prime Minister of our small nation. But does he really have serious aspirations for his prime ministership? Or even New Zealand?

One gets the feeling that Key and his Ministers quite like their ministerial BMWs and have forgotten why they’re allowed to ride around in them. We certainly don’t hear them talking about being “ambitious for New Zealand” very much these days.

Part of this is due to National’s tax cuts, even accepting the rosy predictions English made about the cost of his tax packages, they still cost a significant amount (green blocks). This year the deficit has been worsened by one-off events in the form of the Christchurch earthquake and the South Canterbury Finance bailout (brown and purple blocks). But there’s still a huge difference between the 2008 projections and what happened that isn’t accounted for by the one-offs or the borrowing for tax cuts. What’s behind that?

When we look at the GDP growth forecasts vs reality for the same period, the answer becomes clear. Every year, National has projected that a return to strong growth is just around the corner which will mean more tax take, lower benefit costs  – and a smaller deficit. But it hasn’t eventuated. Instead, the economy has stagnated under National and every year National has evened up having to slap billions more on the taxpayers’ bill to cover for this economic underperformance (blue block).

 No doubt today’s budget will also contain rosy growth projections. Will the reality end up being more deficit blowouts?

Implications: The  growth upturn “hockey stick” just keeps getting pushed out into the future.  The so-called GST tax switch had no discernable positive impact on growth.  And the same rosy forecasts will be embedded in today’s Budget.  On this track record Budget 2011 growth  projections will not be worth the paper they are written on.

When the 2009 growth projections are added the picture gets even more interesting.  As this graph shows the actual GDP growth track has been so bad that it is back down to the proections made by Treasury during the darkest days of the 2008/9 global financial crisis.  

In other words, despite the international crisis having passed 18 months ago and NZ receiving record prices for our agricultrual commodities, our economy has performed so badly that it is back down to the track Treasury predicted during the darkest days of the crisis.   Quite simply, whatever the Govt has been doing is not working. 

In a future post we will decompose the relative impact on debt of this under-performance and otehr factors like earthquakes.

There is no coherent plan from National on how to manage debt reduction alongside needed investments in economic and export development, closing the savings gap, repairing the damage to middle New Zealand, and giving all Kiwis hope and confidence for the future.

Labour has an integrated economic strategy that will achive that withi a fully costed programme that will reduce net debt over a 10 year economic cycle.  You can see the direction we are heading in set out in a recent speech I gave to Business NZ  here.

For the wonks among you, here is the underlying data – all the Government’s own numbers.

 Sources: Budget relevant documents and Statistics NZ series

This underperfromance is a key factor – alongside fiscally irresponsible and economically useless tax cuts – driving the awful budget deficit New Zealand now faces. 

in response to requests on my Facebook page, here are the underlying numbers.

Source: Parliamentary Library

Q:  Has NZ’s debt really cimbed from $300 m per week to $380 m per week?  Why?

A:  The difference between $300 m and $380 m is the fact that NZDMO is in the market issuing more debt securities than it needs beacuse demand is good and prices low. In other words it is bringing forward next years borrowing, and that is all.  Of the $300m about half is rollover of exisitng debt.  So next year it can say it reduced the borrowing, beacuse it will have pre-borrowed some of what it needs already.

Q:  How much will the cuts to Kiwisaver Key announceed today save?  $40m a year ?

A:   Kiwisaver cost savings are unknown untill policy is made clear in the Budget.  The Member Tax Credit costs about $880 m per year.  Half that would be ($440m pa) would be  ”saved” to Govt if MTC halved to $10 per week.  But that ’saving’ but would have to be offset against lower private savings from weaker incentices.   That is a problem beacuse private debt is huge  – in fact 90% of NZ’s total international debt is private.   Govt debt is only 10% of the problem.

Q:  Is it true that Dr Cullen’s books in 2008 showed a fiscal surplus in 2008?

A:  Yes   Dr Cullen’s 2008 books showed a net debt (incl NZSF assets) to GDP ratio surplus of 7.6%   In other words we were in positive CREDIT, though the GFC meant a forecast net deficit up to around 2% of GDP.    Gross debt to GDP is ow 34%and climbing under National.  It is hard to believe that National still gripes and tries to shift blame.   Time they manned up and took some responisbility for their own choices – like $23 Billion of tax cuts over 4 years in Budgets 2009 and 2010.

Q:  Are our incomes catching up with Australia like National promised?

A: No, we are going backwards.  When National took office in 2008 the gap was about 30% of GDP per capita   It was 34.7% and growing last time I checked.

Bottom line – NZ’s problems are serious and need serious fixes, but don’t buy the panic line that it is only public debt that matters.   Responsible fiscal management, including reducing debt across the cycle, is essential- but it is not the ONLY thing that matters.  We have to grow jobs, exports and savings at the same time as reducing debt.  And we have to build a country that is fair, caring and ready to take on the world, not slide into two NZs – one for the haves and another for the have nots.

PS happy to take your budget questions – message me on http://www.facebook.com/david.cunliffe.labour.

Treasury and the Reserve Bank had both forecast zero growth for the quarter. I have taken the view that was about right and that minor variation either side would not change the story.

It doesn’t. Today’s 0.2% is within a shade of that, and is still subject to revision.

The big picture is that the economy is going nowhere because National has no plan.

A breakdown of the statistics is instructive – wholesale trade is down, retail is down, accommodation and restaurants are down, confirming the message that businesses in New Zealand towns and cities have been giving us — that for them 2010 was even worse than 2009.

Cost of living pressures were also clear.  Goods and services purchased by Kiwi households are almost flat even though prices rose 2.3 percent in the December quarter alone.  This shows Kiwi families are hard hit by the rising cost of living and are having to tighten their belts month by month.

There is no good news on the external side either. Imports rose faster than exports, and the fastest-rising export, raw logs, effectively represents exporting Kiwi processing jobs along with the timber.

Kiwi families and firms are borrowing more than ever before to stay afloat, and the Reserve Bank says this will continue until 2013.

Bill English is presiding over an old-fashioned slump, and clearly has no idea what to do about it.

Last week he wanted to put the whole cost of the earthquake on the country’s credit card, but Prime Minister John Key rolled him a few days later when announcing a zero budget this year.

Economics 101 says that savage budget cuts in the middle of a deep recession will only put more people out of work, undermine confidence, reduce demand and drive down tax flows.

 This isn’t a plan. It’s a recipe for continuing economic failure.