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National cause of dire economy

Written By: - Date published: 2:20 pm, December 21st, 2010 - 12 comments
Categories: benefits, cycleway, Economy, employment, tax - Tags: ,

National still seem to be getting a lot of cover for their economic mismanagement from the Global Financial Crisis way back in 2007-2008.  But New Zealand’s failure to be “roaring out of recession”, as John Key promised, is no longer tied to the GFC.  It’s Bill English and National’s economic policies that mean that the government deficit is pushing the limits with no reward for average kiwis.

We appear to be headed to a double-dip recession – we’ll find out on Thursday if it starts in the second half of this year, or spanning into 2011.  Meanwhile Australia are roaring out of recession, and the promise, nay, the fundamental purpose of this government1, for our wages to catch up with Aussie is slipping ever faster and further away.

If Australia can do it, why can’t we?  People look to Greece and Ireland and say “at least we’re not as bad as them” – but they were countries that had, respectively: overspent previously, and with massive corruption problems; or had had to bail out their massive banks after making themselves a global financial hub, much like John Key wants here.  Their governments’ cupboards are well and truly bare.

Ours weren’t.  Bill English admitted the great state of the books when he came into government.  Cullen’s 9 prudent years of surplus and resistance to the right’s nagging for tax-cuts had left the country in a great position to weather the recession, with zero net crown debt.

$14 billion spent on National’s tax cuts later and the government’s cupboard is starting to get awfully bare, but we’re not recovering from recession…

Tax cuts for the rich do not stimulate the economy.  They allow the rich to pay off their debts – as we all have far too much personal debt in New Zealand – but they do nothing for the recovery.

A Labour-led government would instead have had a large stimulus package, much like what worked for Australia.  The alternative was, that instead of paying off the rich’s debt, you kick off government projects that need doing, and provide work for those who are struggling to find it.  John Key’s much-maligned Cycleway isn’t wrong in principle, just scale: it provides merely a handful of jobs, where tens of thousands have been lost under this government.

And those people on benefits cost money.  The right want to cut benefits, but the most effective way to do that is to provide people with jobs.  The unemployed want to work, they want to provide for their families.  Housing New Zealand has a shortage of houses, and we have a surplus of builders – get them building!  Auckland’s public transport system needs major improvements – now’s the time!  North Shore and other hospitals need expansion – expand them!  There are many projects that need doing – not make-work schemes, but useful expansions of the economy that could be quickly started.

All those extra employed people wouldn’t be on benefits.  They spend their pay packets at shops, providing more work for others, who in turn spend their additional money – creating jobs and all generating extra GST, business and personal tax…  That’s how a government should spend $14 billion to get an economy roaring out of recession.

Instead the Key-Hide government have given us tax cuts for the rich and an economy that’s whimpering.

1 At least that’s what John Key told us.

12 comments on “National cause of dire economy”

  1. Draco T Bastard 1

    There are many projects that need doing – not make-work schemes, but useful expansions of the economy that could be quickly started.

    But, despite how worthy those things are, you would need to raise taxes to do them and there’s no way NACT were ever going to do that. And, besides, having all those people in work would push up wages and John Key did promise to lower them as one of it’s election promises.

    • Bunji 1.1

      Other than maybe having an ETS where the polluter contributes to the government coffers rather than vice-versa I don’t think there’d really have been any need for tax rises – just not implementing National’s tax cuts. It’s okay to spend some (especially on stimulus) in recessionary times – it’s why you pay down the debt in good times, so you can. Government expenditure should be counter-cyclical.

  2. Bored 2

    Bunji, in what we have come to regard as normal times you might get away with the argument that the Nats are to blame for the economy….normal times might include cheap abundant energy, cheap abundant credit based upon putting debt on future generations etc etc aka the growth economy.

    If the Nats are to be hammered for financial irresponsibility and venality you have a case, but it is really far worse than that. The crime is much bigger. They are guilty of living within a paradigm whose time is up without realising it. Are you falling into the same trap?

    • Bunji 2.1

      If you’re asking me to hammer the Nats on their pay-the-polluter ETS scheme, their “follower rather than leader” stance and general lack of movement on anything to do with climate change, I’m happy to. Their lack of commitment to New Zealand’s clean, green, hi-tech image is truly shameful.

      A proper ETS and more spending on R&D to minimise our contribution to global warming would definitely be in my list of priority policies. But this post is purely of Nats economic handling in their own paradigm – it doesn’t work.

      Edit: as you mention borrowing from future generations – I’m quite happy to hammer National on gutting the Cullen Fund and Kiwisaver too…
      (and yes, equality will serve us better than growth too)

      • Bored 2.1.1

        Bunji, that and a lot more. The key line from me (feck I hate that scumball getting into my language) is that the economic paradigm has changed, what we regarded as “conventional” is over, gone for good. I really believe that the Nats are clueless and venal in the “conventional” sense, but to damn for that is to miss the point. The “conventional cures” as espoused by Labour are also a “past tense”. I condemn the Nats for their myopic lack of any vision, but I am also questioning if Labour really pose anything more than a “velvet gloved” approach to the same path to failure?

        • Robert Atack 2.1.1.1

          B – that goes for all of them, and 99.4% (‘we use to say .6% got it) of everyone else, there must be 1 or 2 that understand things, they are the corrupt ones, the rest are just stupid.
          And as most people worship this Easter Island cult, we will end up in the same pot … literally.
          We just have to accept reality, Reg says it best

          The Spirit in the Gene: Humanity’s Proud Illusion and the Laws of Nature
          «As for pointing to our mental failures with scorn or dismay, we might as well profess disappointment with the mechanics of gravity or the laws of thermodynamics. In other words, the degree of disillusionment we feel in response to any particular human behavior is the precise measure of our ignorance of its evolutionary and genetic origins.»
          – Reg Morrison

          Oh and the Green party being one of the biggest worshipers in the ‘Everyone should have a fare share’ religion.

  3. r0b 3

    Yes, before the election National were dithering, and Labour were ready with a real plan:

    If actions speak louder than words, Labour was the winner on Day One of the official election campaign – game, set and match. In the fight over which of the two major parties is best at running the economy, Labour scored a significant tactical victory. …

    Key’s earlier speech at National’s campaign opening in Auckland’s SkyCity Convention Centre said nothing new on economic policy. In fact, it said nothing new about anything.

    If that was not bad enough, Labour was getting ready to lay out something really meaty just a few blocks away in the Auckland Town Hall. There, Helen Clark trumped Key by delivering the recovery package he had been demanding, including contingency plans to save jobs and the promise of a mini-budget in December. The upshot was that Labour looked like it was governing; National looked complacent and flat-footed.

    We could have had a real recovery, but nahhh – competence is so boring – it was time for a change.

  4. Jacko 4

    Brian Gould’s recent Death Spiral article http://www.bryangould.net/id141.html
    supports this perspective.

  5. Scott 5

    Hey, I’m as much a partisan hack as the next guy, but let’s be fair – the Nats didn’t cause the global financial crisis. That arose due to factors beyond the control of anyone in our country.

    They aren’t doing anything to get us out of it, though. 🙂

    • lprent 5.1

      I think that the last point was what the post was about. They have essentially taken us back into nationals traditional debt to pay for tax cuts – which do bugger all for the economy as a whole. Now they’re scratching their heads looking for the end of the recession to increase their tax take – and it isn’t happening. They’ll look at cutting government spending, and finding that there isn’t that much to cut – at least not that causes more drop in their revenues. But they will do it anyway.

      It is the usual idiotic response from our right governments. With minor variations it was what they did in the 90’s as well. How to drag an external recession out and make last for years longer than required. I always find that right wingers are always stupid enough to try things that have already failed. It has been the trademark of national governance throughout my working life, from Muldoon onwards.

    • ak 5.2

      They aren’t doing anything to get us out of it…

      Wouldn’t mind so much if they’d done nothing. But they promised “north of fifty dollars a week” for our votes, then gave us frack-all. Then they gave millions to their rich mates, and put our grandchildren in hock to pay for it.

      Liars and thieves. That own the media, so you’ll never hear of it.

    • Colonial Viper 5.3

      Why aren’t we closing the gap? I hear Australian incomes are even further ahead of us now than when the Bill and John show took over.

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