Surplus 2014/15: an excuse for not doing what needs doing

Written By: - Date published: 7:50 am, May 6th, 2013 - 30 comments
Categories: babies, debt / deficit, families, health, housing insulation - Tags:

John Key’s excuse for the planned veto of the extension of paid parental leave is that it would put the 2014/15 surplus at risk.

There’s four answers to that: 1) if you believe Treasury’s numbers, there still would be a surplus, 2) Treasury’s margin of error on government spending and revenue is hundreds of millions per year, which is much larger than the $66m surplus they’re projecting or their projected $55m annual cost of extending the paid parental leave, 3) you could just delay the extension for a year to be ‘safe’ and 4) most importantly, why is going just under or just over some arbitrary line in the Crown’s books the Nats’ one aim for the economy? The truth is, Key’s using the surplus as an excuse for not doing the right thing.

Farrar was praising Key yesterday for getting being on track to surplus but so what? Being in surplus is the easiest thing in the world if it’s all that matters to you – just spend less than you take in. If you don’t care about anything but spending less than you take in, that’s simple – just cut shit until you’re in the black. But, as you know from your own household budget, there’s instances where spending a more than your income is the best option.

The extension to paid parental leave (and, for that matter, the home insulation scheme that also looks set for the chop) are perfect examples of Key putting getting just, just over that surplus line ahead of things that really matter.

Key wants to be able to say ‘we spent 0.07% less on operating expenses than we made in operating income’ rather than ‘we spent 0.01% less on operating expenses than we made in operating income’  – and that matters more to him than giving something like 30,000 babies a year 3 months more with their parents at home.

If they don’t give the home insulation scheme a new round of funding, then it’s because Key wants to be able to say ‘we spent 0.07% less on operating expenses than we made in operating income’ rather than ‘we spent 0.02% more on operating expenses than we made in operating income’ and the 60,000 households a year that don’t get insulated (with a payback of $5 in health improvements for every dollar spent) can go get fucked.

Let me put in a graph for you visual types: here’s the debt/surplus and net debt forecasts without and with the extension of paid parental leave

paid parental leave extension effect

30 comments on “Surplus 2014/15: an excuse for not doing what needs doing ”

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  1. Colonial Viper 1
    6 May 2013 at 8:28 am

    Good analysis JH, but this line of argument is electorally useless. At most it can only comprise 10% of the case made by the Left as it simply buys into our current widely held monetarist-macro economic framing, and its a game that Labour/Greens will always lose because this is the NATs home territory.

    Instead the line needs to be the same as NZ Power – this is a change that ordinary NZ families need, it puts the resources of the country where it can do the most good, and yes, it is very affordable because what is affordable is a matter of priorities and these are the priorities that the Left has.

    • Ben 1.1
      6 May 2013 at 1:29 pm

      “what is affordable is a matter of priorities”

      Exactly. This is the line which should be used to fend off the charge that surplus is more important than the welfare of our children.

  2. Ad 2
    6 May 2013 at 8:59 am

    In this Salon article there are pretty stark comparisons to the handling of the Depression and all the accumulated public debt, and the current situation in the US.

    http://www.salon.com/2013/05/05/austerity_never_works_deficit_hawks_are_amoral_and_wrong/

    Anyone for a go at a counterfactual that Helen Clark won the 2008 election? IMHO by 2009 Cullen would not have sold state assets, but would have put either interest-free student loans or Working For Families on the block.

    • infused 2.1
      6 May 2013 at 11:08 am

      Well something would need to go. You can’t keep spending more than you earn forever.

      • One Anonymous Knucklehead 2.1.1
        6 May 2013 at 11:11 am

        So why do you support the party that consistently does exactly that? Is it cognitive dissonance?

        • felix 2.1.1.1
          6 May 2013 at 11:48 am

          Because you’re not thinking like a tory.

          It only counts as “spending” when it’s spent on things that benefit ordinary people. When it benefits the rich, well that’s just wealth being returned to its rightful place.

          • Polish Pride 2.1.1.1.1
            7 May 2013 at 11:59 am

            Interesting Felix – Given that both the left and the right are actually in the business from taking from one group and giving to another…
            and the result is what effectively plays a large part in us bouncing from left to right and back again roughly every 6 – 9 years…..

            So with that in mind why is it that you continue to support one end of spectrum at the expense of the other?
            Why is it that we are not looking for a solution that takes from no one yet gives everyone what they need and want and puts in place something to deal with true scarcity?

            • Colonial Viper 2.1.1.1.1.1
              7 May 2013 at 12:08 pm

              bouncing from the political right to the just right of centre

        • SomeSuch 2.1.1.2
          6 May 2013 at 11:55 am

          Sheesh. You’re big on generalisations that are factually incorrect. Now if you’d said ‘Government’ rather than ‘party’…

          • One Anonymous Knucklehead 2.1.1.2.1
            6 May 2013 at 12:09 pm

            Picky picky. If you insist on being so pedantic: “The party which in government, consistently does exactly that?”

            • Tim 2.1.1.2.1.1
              6 May 2013 at 12:30 pm

              (Pedantry ….. common amongst ideologues, especially those trying their best to prop up failed ideologies).
              Sheesh …… How’s that for a generalisation.

              • SomeSuch …
                6 May 2013 at 12:54 pm

                Stupid. The NZ government has run a operating surpluses for 15 out of the 19 years since 1994 (that year chosen as that is the year we shifted to GAAP). During that time a number of parties have been in government. One could say that the current government has consistently run operating deficits but one cannot say that the ‘tory party’ has.

                • Pascal's bookie …
                  6 May 2013 at 1:11 pm

                  Well, we know that when the last Labour led govt was running surpluses the then opposition was bellyaching about it and demanding tax cuts. So there is that.

      • Colonial Viper 2.1.2
        6 May 2013 at 12:25 pm

        Well something would need to go. You can’t keep spending more than you earn forever.

        Yeah except governments can decide how much they earn and can even print their own pay packets; you or I can’t.

      • Arfamo 2.1.3
        6 May 2013 at 12:54 pm

        Well something would need to go. You can’t keep spending more than you earn forever.

        You’re right infused. The best solution is to increase the earnings of the lower paid so they are not forced to spend more than they earn to survive when faced with costs they simply cannot meet. The way to do that is to restructure the economy so that it is aimed at full employment and a livable minimum wage that enables ordinary people to save rather than have to use credit. Did you read Ad’s linked article? If the only way to do that is reinstate the tax cuts, then they should simply be reinstated. The well off were doing well enough – many of the middle income mugs who voted National are hopefully now regretting losing their comfortable jobs and bemoaning their declining prosperity.

        • Arfamo 2.1.3.1
          6 May 2013 at 1:07 pm

          Whoops – I meant the next decent government which governs for the well-being of all its citizens should reverse (not reinstate) the Natsy’s tax cuts.

        • Polish Pride 2.1.3.2
          7 May 2013 at 12:30 pm

          “The best solution is to increase the earnings of the lower paid so they are not forced to spend more than they earn to survive when faced with costs they simply cannot meet.”

          No the best solution is to put in place a system where the goal of the system is to ensure that peoples needs and wants are satisfied to the best of its ability.

          “The way to do that is to restructure the economy so that it is aimed at full employment and a livable minimum wage that enables ordinary people to save rather than have to use credit.”

          No the best way to do that is to understand and recognize what it is that actually makes people happy and then build your system with its primary objective being to provide an environment that emphasizes this (rather than GDP as we have now). That would mean not only giving up on the notion of full employment, but completely flipping the entire employment paradigm on its head and actually having the goal of society and the system to FREE people from having to work wherever possible. This can be achieved through better design, automation, robotics and eliminating any jobs that are no longer needed.

          “Did you read Ad’s linked article? If the only way to do that is reinstate the tax cuts, then they should simply be reinstated. The well off were doing well enough – many of the middle income mugs who voted National are hopefully now regretting losing their comfortable jobs and bemoaning their declining prosperity”.

          Yes and then the will vote left who will implement their version of wealth redistribution to fund welfare whilst they are in power over the next 6-9 years until voters in the middle decide they are being taxed too much, hat the government is too big, is wasting tax payers money, (add what ever additional reason/s you feel are needed here)and again vote right who will resume their wealth redistribution policies to fund versions of welfare. Then in 6-9 years we will again be in a similar position to where we are now or worse and…… well you can pretty much repeat the above as many times as you feel you need to until you..

          A: wake up to the actual realities of the system and why it is unlikely to ever be able to solve the problems you really want it to
          or
          B: pass on, at which point it will no longer matter and your children will be left to deal with the same problems and the same system.
          Lets hope that collectively they are smarter than us and change things.

    • Lanthanide 2.2
      6 May 2013 at 1:01 pm

      Um, by 2009, Cullen wouldn’t have given the richest in NZ a massive tax cut.

      • Ad 2.2.1
        6 May 2013 at 2:50 pm

        Agreed, astonishingly stupid move by English. But he would not have been able to withstand the pressure for no tax cut at all. With the national resources that we have, and events that have transpired, are we not able the best public-finance position we could be right now?

  3. Rich 3
    6 May 2013 at 3:22 pm

    The legislative veto is just a standing order of the House. It isn’t an entrenched part of the constitution, it can be suspended or amended by simple majority.

    If Dunne and the Maori MPs were up for it, they could vote to do that and hence allow this legislation to proceed. Their confidence and supply agreements say they will “advise the government” before withdrawing support on a procedural matter, not that they will give such support unconditionally.

    Of course the government could regard paid parental leave as such an affront that they throw their toys out of the pram and call an early election. Bring it on.

    • tamati 3.1
      6 May 2013 at 4:16 pm

      By commiting a government to spend against it’s own wil, you are effectivly denying supply. Key would be forced to call an election, and Kiwis would probably punish the opposition for pointlessly brining down a government.

      • One Anonymous Knucklehead 3.1.1
        6 May 2013 at 4:18 pm

        Bring it.

      • Lightly 3.1.2
        6 May 2013 at 4:58 pm

        or, or, National could vote for the Bill.

      • Rich 3.1.3
        6 May 2013 at 6:58 pm

        No you aren’t.

        Denying supply is a refusal to vote for the annual continuance of the government’s ability to raise taxes, causing it to be unable to govern effectively. Making them spend 0.05% less on tax cuts, holiday highways and spying isn’t a denial of supply.

  4. Ad 4
    6 May 2013 at 4:12 pm

    PM up in Auckland on Friday.
    Will they finally “get” Auckland, prior to Budget 2013?

  5. xtasy 5
    6 May 2013 at 4:25 pm

    Well, Russel Norman has put a good dampener on the news out on the government earning more in tax than expected:

    http://www.scoop.co.nz/stories/PA1305/S00052/focus-on-surplus-distracts-from-failure-on-rebalancing.htm

    Yet these figures will let the government get away with their business, while failing though to actually develop a smarter, yet more diversified and value added economy:

    http://www.stuff.co.nz/national/politics/8538105/Govt-on-track-for-surplus-English

    http://www.tradingeconomics.com/new-zealand/balance-of-trade

    Now, where are Shearer’s or Parker’s comments and press-releases, one asks yet again. Maybe Mana will beat them to it?

    I wonder how much more of the taxes were earned on sales (GST) of newly imported goods like home appliances, gadgets for entertainment, cars and the likes, as a fair number of NZers appear to take advantage of the high exchange rate to buy more imports over the last months? Recent sales appear to have been up a bit.

    GST earns the government a fair bit by the chart found under this link:

    http://www.ird.govt.nz/aboutir/external-stats/revenue-refunds/tax-revenue/revenue-refunds-tax-revenue.html

    Whatever, tax take only shows one aspect, and the over-reliance on exports with low values added, not leading to wider job creation and better paid jobs for most, this leaves NZ poorly prepared for a more challenging future.

    Kicking people off benefits, cutting public service jobs, cutting back on student allowance spending, using firmer collection methods to collect taxes and student debt, that naturally does show in the books.

    Sorry, the Nats will after that nutty ACT Party be the last taxi off the ramp, when it comes to extending parental leave, for sure.

  6. Ruobeil 6
    7 May 2013 at 7:21 am

    Gee, all this money sloshing around. Brilliant.

    How do i get my hands on some of it?

    Oh, i know, do some breeding; that’ll be a good earner.

    How many kids will i need to fund a decent lifestyle? Two? Ten? Why not twenty?

    Now, if i can abdicate my responsibility to the state i should be able to live in the style i’ll no doubt grow accustomed to.

    Free housing, free student loans, free food, free clothing, free, free. Brilliant.

    Why didn’t i think of that?

    Hang on. Where does all this free money come from?

    Do i have to do anything in return, or just stick my hand out?

    Fill in an income and expenditure report like i would if i borrowed from the bank?

    Can i continue my SKY subscription?

    Cigarettes?

    Booze?

    Union fees?

    And i guess if this all becomes to unaffordable we can just crank up the money printing presses.

    This is such a good little scheme, i better get down to business (wink, wink, nudge, nudge).