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Put it on the kids’ tab

Written By: - Date published: 12:00 pm, April 29th, 2008 - 6 comments
Categories: election 2008, inoculation, national, slippery, tax - Tags: , , , , , , , , , ,

Some may have noted an odd series of questions in Parliament and press releases from Bill English around government borrowing over the last month. The questions purposely conflated the idea of maintaining current debt levels with increasing debt. We noted this at the time and Tane correctly picked the strategy: First, sow confusion about debt amongst observers (ie the press gallery) on the issue of government borrowing. Then, announce you will increase government borrowing but keep your language couched in confusing and harmless sounding economic language.

That’s what Key did on Saturday in the Dompost: ‘we are not fixated on the 20 per cent debt to GDP target. Bill English will spell out what he thinks is the right level. But I don’t think there is a strong economic case that 15 per cent is so much better than 25 per cent.

Oh, it’s just a few percent move of some government thing, doesn’t sound too bad, eh? But consider that increasing gross government debt from its current level of 18% of GDP to 25% of GDP really means that we borrow an extra $10-$15 billion. Every year, we would be paying out up to a billion dollars in interest on that borrowing, and that huge injection of borrowed money into the economy would be massively inflationary. So, why does National want to do it? To get the money for some catchy programmes (like the fibre plan, which is $1.5 billion of borrowing) and to fund tax cuts.

Now, National will say that it is not borrowing for tax cuts, it is borrowing for investment. That’s just more muddying of the waters to confuse people. If National increases borrowing, it will not have to use tax dollars for investment and, so, will be able to afford larger tax cuts. No increased borrowing, smaller tax cuts; increased borrowing, larger tax cuts. Therefore, the borrowing most certainly would pay for tax cuts.

Key says he is happy to increase ‘intergenerational debt’. Think about that. National will give you a bigger tax cut now, and your children will to left to pick up the tab.

6 comments on “Put it on the kids’ tab ”

  1. AncientGeek 1

    Which is completely unacceptable.

    I just finished paying (through my taxes) for the big spendup that national did for my parents during the 1970’s and 1980’s.

    What did support for the sheep farmers via SMP’s manage to do for the NZ economy long term? Think big was a disaster. Both were theories dreamed up by national to win an election and forward loaded onto future generations.

    The current theory is that taxcuts now will somehow transform the NZ economy. Yeah right! I’ll take a bet that it goes straight into consumption not into investment.

    Also this is from the party that has a terrible record of actually ever cutting taxes. Last time as I remember, they did a minor reduction in income tax, and increased GST by 2.5%.

    National – the party of the stupid economic theories.

    Ok – its inflammatory, but it is how I feel about them.

  2. randal 2

    thanks Steve…the tories are experts at using confusing lanaguage to baffle the press and whats more the press seem to want to be baffled. anything that involves hard work or calling the current flavour of the month to account is above them. All they want to do is focus on personality becuase thats what tom scott did to muldoon and thats what the consumers demand…yeah right. the press is infantilised to the max and they love themselves to boot. they keep looking for a story to jump out and bite them without them having to do any work.

  3. Noddy (used to be Dr.No) 3

    Seriously, do you even understand economics? This ‘piggy bank pocket money approach’ to an economic argument is light even for you guys…

  4. AncientGeek 4

    Ah you sound like your namesake.

    Fact is that if you borrow then you have to pay back the principal plus interest. If you don’t borrow then you don’t have the cost of the interest.

    The project you are borrowing for has to have a return that is at least as much as the interest. At present the nats want to do at least two things. Pay for an infrastructure project, and have bigger taxcuts than Labour.

    The taxcuts presumably more than are required under a kenysian stimulation package, and are meant to give workers and offset against cost of living increases so they don’t go for wage increases.

    They run out of money to do both, so they want to borrow. Now they really should look at the financial returns of both against the cost they’re loading on to the people who will have to pay it back.

    What is hard about that? Surely they analysed both projects as a costs-benefit analysis before putting them up in front of the voters

    But the nats currently run on fluff – I can’t see them offering cost-benefit analysis. Do you? Then paste a link.

    captcha: there lottery
    Yep

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