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Farewell Michael

Written By: - Date published: 6:29 am, May 1st, 2009 - 23 comments
Categories: uncategorized - Tags:

Well the other shoe has dropped, and Michael Cullen has now left parliament. His valedictory speech is classic Cullen – best line (re his new role at NZ Post) “When I attacked National last year for swallowing so many dead rats little did I think that some might see me as one of them.”

Anticipating the usual drivel from right wing trolls, let it be stated that Cullen was an excellent, prudent manager of the economy. He has left us well placed to weather the current economic crisis – according to Treasury, the IMF, and even the National Party). It may get bad, but it won’t get nearly as bad as it would have if Cullen hadn’t planned ahead. His lasting legacy will be the visionary long term infrastructure that he put in place, KiwiSaver, KiwiBank, and the Superannuation fund.

I liked Vernon Small’s piece on Cullen’s farewell, and I can’t do better than his final words: “So retires from the House a hilarious, caring, clever, compassionate smart-arse.”
– Guest

To that I just want to add that, barring revolutionary reforms, Finance Ministers only have marginal impact on the performance of the economy as a whole in the short-term.

What they can do is influence the distribution of wealth to reduce poverty and build the foundations for the future. That is Cullen’s legacy – Working for Families, the Cullen Fund, paying down debt, a more progressive tax system (bottom rate down to 12.5%, top rate to 39%), returning assets to Kiwi hands and keeping them there, and policies like free doctors’ visits, free early childhood education, interest-free student loans the benefits of which we will experience in the decades to come.
-Eddie

23 comments on “Farewell Michael ”

  1. What a load of BS. Cullen was a right wing politician who implemented and promoted neoliberal economic policies that have impacted adversely on ordinary people.
    This sort of pro-Labour crap – no matter what – is so typical of The Standard.

  2. Tim Ellis 2

    I disagree with you, Eddie, on Cullen’s legacy. I think historical reviews of him will be mixed. He will be considered a darling of the Left for his redistribution of wealth. On the right, I think his massive increases in social spending will be seen to have been unsustainable, and have left us a decade of deficits. He has left many years of crippling debt for the current National Government to deal with. There will also be very mixed views of his performance in managing the economy. On the Left, you will point to the years of growth under Cullen. On the Right, many will point to the fact that New Zealand’s strong economic performance was due to buoyant international economic conditions, high commodity prices, and factors outside the Minister of Finance’s control.

    I don’t think Cullen succeeded in creating an economic culture-shift under Cullen. Social service spending ballooned, with little to identify real improvements in outcomes. I think many on the right will view the Cullen years as wasted economic opportunity. It was a time when New Zealand should have cashed in and made real productivity gains in the long term. We didn’t.

    To be charitable to Cullen, he was a highly competent Minister with a very strong grasp of his portfolios and he wasn’t dominated by officials. That is the mark of a good Minister. I think it’s also fair to say that just as Clark was the undisputed political leader of her generation, Cullen was the undisputed parliamentary master of his generation.

    As a parliamentary valedictory, it is brilliant. I do wonder whether when MPs begin to carve out their careers, they should begin writing and framing their valedictory speeches. Cullen’s was masterful.

    • r0b 2.1

      He has left many years of crippling debt for the current National Government to deal with.

      Cullen massively reduced debt, which is why NZ was well placed going in to this crisis. Future projected debt arising from the international crisis certainly needs dealing with, but deal with it we can, by raising taxes.

      On the Right, many will point to the fact that New Zealand’s strong economic performance was due to buoyant international economic conditions, high commodity prices, and factors outside the Minister of Finance’s control.

      On the Right many will continue to ignore the fact that NZ did better than other comparable economies during this time, while also paying down huge amounts of debt (left to us by the previous National administration).

      Social service spending ballooned, with little to identify real improvements in outcomes.

      What “identifies” improvements? Numbers on benefits fell, numbers below the poverty line fell, crime rates fell, suicide rates fell – all those are directly measurable. And many of the real improvements in outcomes are long term, visionary planning to deal with the problems of the future (superannuation). Cullen didn’t spend it all on short term fixes, or piss it all away in tax cuts to the rich, he thought long term, he acted long term. Very rare in a politician, and NZ will be thanking him for decades to come.

      • mickysavage 2.1.1

        Why is it that when the economy does well under a left of centre Government it is because of buoyant economic conditions but if it does well under a right wing Government it is because of wise stewartship?

        • jerry 2.1.1.1

          You do realise the same arguement is used by your political opponents albeit with opposite players.

        • Chris S 2.1.1.2

          Agreed Micky.

          Also, when the economy does poorly, directly linked to bad global economic issues, it’s all Cullen’s fault?

          They need to get their attack lines sorted out.

      • BLiP 2.1.2

        What r0b said, plus:

        It was a time when New Zealand should have cashed in and made real productivity gains in the long term. We didn’t.

        That was down to the private sector which preferred to ship containers of cash offshore rather than invest in New Zealand.

        To be charitable to Cullen . . .

        If you’re going to wite bollocks and echo Kiwiblob nonsense, why bother?

  3. BeShakey 3

    In response to Tim, I don’t think that an assessment of a Minister (of the left or right), should be based on whether their opponents like what they did. Even in that regard Cullen has left a raft of measures that, while perhaps not liked, are now accepted as part of the political landscape.

    In terms of unproductive social investments, there were undoubtedly some of those, but I question whether there were as many or if they were as costly as sometimes claimed. Many of the investments will show social, economic and environmental benefits only over the longer term. Examples include some of the education and health investments. While it would be nice to have short-term outcome (rather than output) indicators of the success of these programmes, no one on the right that I’ve talked to has been able to suggest any. That leaves the option of doing nothing to address many of the entrenched issues in New Zealand, or taking the kind of long term/big return measures that Cullen/Labour took.

    In one respect I think that will be an important Cullen legacy, he was willing to introduce measures that weren’t going to have as large a political payoff in his political lifetime as some of the alternatives.

  4. lprent 5

    I’ll miss him. After 30 years of barely incompetent management at the treasury from the 60’s to the 90’s, we finally got a manager who was aware of the downstream costs and risks of doing or not doing change.

    It meant for the first time during my lifetime we were not merely lurching from political or fiscal crisis to the next one. Some forward planning was being done on what happens in the coming decades. In particular with the shifting age balances in the population with the impacts that brings on superannuation, healthcare, tax-payer base, etc.

    Sure Michael Cullen had a good decade to do it in. However he concentrated on improving the governments fiscal position by killing government debt as fast as was feasible. This resulted in the effective removal of the interest payments that had been bleeding our fiscal position dry since the 70’s. At one stage for a number of years, the interest on government debt was the single largest line item in the budget. Removing that interest burden was the biggest single productivity boost that the economy could have received. It also substantially reduced our forward risks when inevitably the world economy went into a substantial decline, as it has now.

    Similarly he put in place some measures to ameliorate the future liabilities of an aging population. The NZ Superannuation fund is designed to reduce the burden on future taxpayers for the superannuation of the current taxpayers. Similarly Kiwisaver is designed to assist with rising expectations of superannuates with the constrained tax base of an aging population.

    To do that he resisted the short-sighted calls to do tax-cuts, preferring to secure our longer term position rather than shore up short-term popularity as other parties did. Eventually he was pushed into accepting the political need for personal taxcuts (the business taxes had already been cut for a good reason). It was probably his only really poor decision. We still have the forward liabilities that are not covered, and will have to be by the taxpayers when they come due.

    There are innumerable things that he put into place. From the trivial to the extreme. However they were all done with considerable forethought. A stark contrast to the thoughtless short-term changes that were common with Muldoon, Douglas, and Birch. In the latter two they were heavily constrained by Muldoons legacy.

    The biggest problem that he was only starting to work on was the appalling private debt and private savings record in NZ. However he did start the work that was required to correct those imbalances taht are still in our economy.

    I’ll miss him as being the most effective treasurer we have had in my lifetime, because he concentrated on the long-term goals rather than fire-fighting.

    The jury is still out on English, who is in fire-fighting mode at present with the global problems. It will be interesting to see if he can manage to balance between the short and long-term issues.

  5. Pat 6

    I thought Cullen’s best line was at the end:

    “To the Greens – good luck. But loosen up a bit; saving the planet needs to sound less like a punishment for our sins if it is going to succeed.”

    In one sentence, he has hit the nail on the head. I wonder in the Greens are smart enough to see that this is their primary problem with their message.

    catchpa: bestpaid wits

    Cullen certainly was!

  6. Pascal's bookie 7

    Yep, right on Lynn.

    Thanks Dr. Cullen, and go on, write a book. 🙂

  7. Mikey 8

    Just remember we know have a Prime Minister who accused Cullen of over-taxing the country by the size of the $11 billion surplus – money in fact that had been allocated if you understand fiscal policy. It was a cynical play on journalist’s failure to grasp fiscal policy – their ignorance something Cullen noted on Weds (not Vernon Small I should add). Funny how tax cuts are now no longer the silver bullet the Nats so long claimed them to be. And imagine how the debt position would look like it if Cullen had listened and made big tax cuts. I would have thought saving should be a key policy in dark times too – sensible long term policy and what have the Nats done, pruned KiwiSaver and will shortly take the axe to the Super Fund in the Budget. Where is their plan for recovery – no tax cuts – lower savings – no R&D assistance – no science fund?

  8. Stephen 9

    And imagine how the debt position would look like it if Cullen had listened and made big tax cuts.

    Can anyone guess what the debt position would be if he’d given equivalent tax cuts for all instead of WFF?

    • lprent 9.1

      Now or in the future? Short-term or long-term. That is exactly the response you’d expect from a short-thinking Treasurer.

      Look at the long-term downstream costs when the kids that WFF was targeted at hit (or didn’t hit) the workforce. The costs of having kids is pretty high. It was rapidly getting to the point that couples in the lower to mid income brackets wouldn’t have kids because it was too much of a financial strain.

      So it meant that people like me who don’t have kids would have been looking at a severely reduced tax base to support our needs when we get old and feeble. WFF is a good long-term measure to prevent a inter-generational tax crisis in 20-30 years time. It certainly reduced the severe drop in birth rate that was happening during the 90’s.

  9. Stephen 10

    Eventually he was pushed into accepting the political need for personal taxcuts (the business taxes had already been cut for a good reason). It was probably his only really poor decision.

    Didn’t he effectively raise taxes on many by not adjusting for inflation all those years?

  10. Tom M 11

    He should totally start a blog, it would be phenomenal.

  11. BeShakey 12

    Can anyone guess what the debt position would be if he’d given equivalent tax cuts for all instead of WFF?

    About the same as now, but with worse social outcomes for those for whom WFF provided social and economic benefits?

  12. jarbury 13

    Can anyone guess what the debt position would be if he’d given equivalent tax cuts for all instead of WFF?
    It would be, almost by definition, the same. After all, you did say equivalent.

    Working for Families is the first genuine attempt to reduce social inequality since…. the 1960s? No wonder the right hates it so much.

  13. Stephen 14

    Thanks you two.

    It would be, almost by definition, the same. After all, you did say equivalent

    I’m not intimately familiar with issues of the economy, however I do have the impression that taxes have some sort of effect on the economy. Say if all people earning under 40,000 got the money funnelled into WFF, would that have had a different effect to giving money to couples earning $100,000 (remember the ipod ad!)?

    Working for Families is the first genuine attempt to reduce social inequality since . the 1960s? No wonder the right hates it so much.

    So why give it to the rich*?! I think what the right hate about it are the really high marginal tax rates that can occur…

    *Which lately seems to be those earning over 40k, but hey whatever.

  14. jarbury 15

    Lowering taxes generally benefits those earning the most. The right is a bit disingenuous on this issue saying “$10 a week extra means more to a poor person than $100 a week extra to a rich person – that’s total bollocks, the rich person has still done way better out of the deal. The only time this doesn’t happen is when tax rates on low thresholds are reduced (or ideally eliminated). The right generally argues that giving the rich more money is good for the economy, therefore tax cuts are good for the economy and for society as a whole (that is, if they actually care about society as a whole).

    However, that is only true if you believe in “trickle-down” economics. Increasing polarisation of wealth in the USA over the past 30 years tends me to think that trickle-down economics is a farce, and tax cuts for the wealthy benefit them and them alone.

    Anyhow, getting back to WFF there is an obvious advantage in targeted assistnce – in that it’s TARGETED. That is, it goes to those who most need it, and because it doesn’t go to a wider group of people than those who most need it, it can have the biggest effect. I can’t exactly remember the income rate where WFF disappears, but even if it is $100,000 I can see how a family with that income (probably via a single-income earner), a big mortgage and potentially a few kids would need it more than a few uni graduates on $40k each sharing a flat.

    For what is spent on WFF you probably could create a tax free threshold for maybe the bottom $25k of income. However, that’s going to assist your multi-millionaire just as much as a middle-income family who really need the money. And because both the multi-millionare and the middle income family both get this money (and all the recent grads, and the DINKYs) there’s far less money in the pot for the targeted assistance – so therefore there ends up being less assistance.

    Regarding high marginal tax rates… well that’s life when you do something like this. I don’t really think they disincentivise people from wanting a better paid job… surely everyone wants to be paid more, even if it’s just a little bit more after tax. Do you really reckon someone would turn down the opportunity for a higher paying job, or work harder to achieve one, because they know their tax rate might go up a bit?

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