Monday, 4 August 2008

National plans big debts under 'Think Big 2'

PM Cluck has been surprisingly astute lately, and was on the money again this morning when she compared John Key's infrastructure-on-credit plans to those of former National Prime Minister Sir Robert Muldoon, and his ambitious "Think Big" schemes.

Muldoon and Bill Birch led the "interventionist state economic strategy", running up massive external deficits to pay for large-scale Government industrial projects, which took years to pay back.

Speaking on TV this morning, Cluck described Key's plans as "incredible"...
"The big idea is just borrow the money. Run up the debt. All our students know how hard it is to pay a debt back, all our families know how hard it is to pay a mortgage back and here we are in the middle of international financial market turmoil and the National Party want to borrow the money."
Key dismissed the comparisons to Sir Robert, saying the National Party would oversee a modest increase in the country's debt-to-GDP target, to fund $5 billion worth of spending in "infrastructure".

The plans, and the other 9 pledges announced by National at the party's annual conference should remind voters that the party is little better at taking care of taxpayers' money than the Labour Party.

Apart from a sensible reigning in of expenditure under Ruth Richardson in the early 90s (and some good promises under Don Brash before the 2005 election), the National Party doesn't have a history as good economic caretakers.

Those fears aren't calmed any by the possibility of serious-centrist Bill English as the next Finance Minister.

Kiwiblog passes comment on the full transcript of Deputy Leader Bill English's "leaked chat" with a delegate at the National conference, where English reveals how his ideology differs from many of the party's supporters...
NATIONAL DUDE: What about getting rid of Kiwibank, I mean…

ENGLISH: Well, eventually, but not now. Well, its working. A lot of our supporters get a bit antsy about it, but its working. It’s like a lot of things…
English also reveals he wasn't a supporter of Brash's harder economic policy (which helped push National within a whisker of winning the 2005 election, up from just 21% support under English), and his ideology clearly falls in the "tax and spend" category...

ENGLISH: And all our work tells us they’re pretty keen to keeping the bit they’ve got. And we call them Labour-plus voters - and they’re sitting there thinking “that nice man Mr Key is pretty smart – he’ll get me a bit more...

And the reality is if we had been the government with the surpluses they had, we would have had something, like Working for Families, but not the same. We would have given them quite a bit of cash back.

And what happens is – you go in there to try and change it, frankly Don and co got a bit carried away, cos they didn’t understand it.

If you give people money then, it is very hard, there’s a set of inevitable problems. It’s like physics, right. If you push something up its gonna drop. If you give people cash, you have high marginal tax rates. OK, that’s it. You can’t get round that. Don thought he could but he couldn’t. So did John, actually – but you can’t.

Hello? Former Reserve Bank Governor Don Brash didn't understand basic economic mathematics?? I hardly think so! It also sounds like English has in some part shaped Key's thinking.

It is very simple to give people "cash" back, by taking much less of their own money off them in the first place! If there is still a desire to directly tax people to fund Government activities, a flat tax across the board results in a serious lack of "high marginal tax rates".

It is good to see National are planning another series of tax cuts in April 2009 and 2010, but from John Key's comments on television last night, it sounds like they won't be as generous as the "$50 a week" he had previously hinted at.
National pledges include the rather unambitious "Bring discipline to government spending" and "Have a lid on staff numbers in the core public service", rather than bold plans to slash wasteful spending as a means of cutting Government expenditure, and saving the money of hard working New Zealand taxpayers.

Liberty Scott sums up the thinking of a growing number of people... that basically the National Party doesn't offer anything new...
That, and its inherent lack of courage and conservatism... That gutlessness to not even roll back what Labour has done to National policy in 1999 is an abysmal success for mediocrity.
* Stuff: Debt to pay for infrastructure

* Not PC: Borrowing to fake credibility
* Liberty Scott: National looks to Muldoon and Pork
* Liberty Scott: National's fundamental problem

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