Government profligacy comes back to bite an irresponsible govt
An announcement this week shows this government’s alleged economic management is even more irresponsible than we thought.
When the recession hit the decision facing everyone in the country, from politician to businessman, from borrower to creditor, was this: whether to hunker down, look at your bottom lines and reduce every overhead you can to meet falling revenues, or to keep spending like a drunken sailor and borrow heavily to cover the ever-increasing gap between incomings and outgoings.
It is now a matter of record that governments both central and local, both here and overseas, almost to a man and woman chose the latter course. Lacking both the courage and the conviction to do what had to be done, even what the Prime Minister himself told the world needed to be done (“you can’t spend your way out of a crisis,” John Key told the March, 2009 Wall Street Journal*) the National Government in particular chose to pursue the opposite course: raising spending year after year with borrowing of around $300 million per week to keep the government’s spending spree on the road.
So much for responsible government. Their pledge to the public, supposedly justifying this golden shower of government profligacy, rested solely on the imaginative—not to say heroic—assumptions by Treasury that the government’s Budget would somehow go from red and bleeding over the last few years of National’s management to black and bonny in 2014/15.
How would the National Government achieve this wondrous state of affairs without cutting any spending? “Somehow” came the answer from both Treasury and the Blue Team’s alleged economic managers. Even at the time the “plan” appeared to be little more than borrow and hope—borrow to keep the bread and circuses coming, and hope the economic situation picks up.
Even at the time this looked stupid. Now, it’s just pure fantasy.
When this assumption of balanced budgets by 2014 were first announced they were roundly rubbished, but after enough people kept repeating the same thing over and over again then “serious” economic commentators who should have known better began repeating the inanity themselves.
But it’s not true and never could have been. Those who downgraded the government’s credit knew it, even if Bill English didn’t.
The assumption was laughable in 2009. And now in 2012 when those who made it now concede it is not possible—and sober economic commentators understand it was never possible—it’s no longer laughable, it’s tragic.
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* Key told the Journal his idea for New Zealand was to “grow it out of recession by improving productivity,” “putting Mr. Key National Party at odds with Washington, Tokyo and Canberra” noted the Journal.
“Those capitals are rolling out billions of dollars in stimulus packages -- with taxpayers' money -- to try to prop up growth. That's ‘risky,’ Mr. Key says. ‘You've saddled future generations with an enormous amount of debt that then they have to repay,’ he explains. ‘There is actually a limit to what governments can do’.”
There is. This is true. But somewhere between Wall Street and Wellington Mr Key appears either to have visited Damascus or to have thought he could tell one group of people what they wanted to hear and another what they wanted to hear—with both messages at total odds with each other. Or in other words, to place deception above doing the right thing.
Which of the two choices do you think he made?
Labels: Budget and Taxation