The borrowed bunny

Written By: - Date published: 11:56 am, May 22nd, 2010 - 41 comments
Categories: budget 2010, public services, spin, tax - Tags:

It’s interesting to see how Irish’s ‘rabbit from a hat’ metaphor has taken off for describing this Budget. Some, like Tracey Watkins, are even using it positively. She needs to have a bit more of a think about what the rabbit from a hat is.

The rabbit itself is nothing special. In fact, in this case it’s a borrowed bunny. Bill English is borrowing the billion dollars it’s costing to reduce the middle tax rate by a larger than indicated amount. The magician has presented it as a gift for us but we have to pay for it, with interest.

What makes the rabbit seem extraordinary is a bit of sleight of hand. You’re looking one way and, as Irish predicted, along comes something that you didn’t think would happen. Nothing magical has taken place, you’ve just been spun.

Now, there’s another layer. Street magicians often work in cahoots with pickpockets. While we’re distracted with the rabbit ‘magically’ appearing from the hat, the pickpocket is moving through the crowd – nicking early childhood education funding here, state housing money, funding for home help for the elderly.

The media has this strange tendency to portray tax cuts as costless, as manna from heaven. It’s as if they think that the money was just stilling in a giant vault, unused. In fact, every tax cut means a higher tax somewhere else, a spending cut, or more borrowing, as Labour’s video cutely illustrates:

The gap between the way the media portrays tax cuts and the reality is important because surveys show that if you ask people ‘do you want a tax cut or better public services?’ people say ‘better public services’ but if you just say ‘do you want a tax cut?’ people say ‘yes’. By only giving half the story, the media fundamentally alters the public’s perception of and opinion on tax changes.

In the end, we’re left paying for a bunny, and having to find private money to make up for public spending cuts. For a government to get praised for that is some trick.

41 comments on “The borrowed bunny”

  1. felix 1

    Good lord is that seriously Labour’s best effort at communication?

    If not, why not?

    If so, we really are fucked.

    • frustrated 1.1

      Yes, Dunno, Yes

    • We’re fucked, Felix.

    • Marty G 1.3

      I thought it was cute. It’s probably just been whipped out in a few hours by a couple of staff,it’s not the centrepiece of their communications.

      • felix 1.3.1

        Well gee, Marty – If only they’d had some advance warning that there was a budget due last week then maybe they could’ve pulled finger a bit sooner eh?

        Are you taking the piss, Marty?

        • Marty G 1.3.1.1

          the angle in the vid couldn’t be made before the budget because everyone thought the tax swap would be revenue neutral

          • felix 1.3.1.1.1

            Of course everyone thought that. (Except for, umm, the authors of about every second or third post here for the past month)

            Allow me to walk you through the items listed as offsetting any tax cuts:

            Early childcare costs
            Student loan fees
            ACC levies
            Rent tax
            GST
            Inflation

            Please tell me which of these were such huge surprises that no video content could be prepared in advance of the budget?

            I really hope you are taking the piss.

          • Draco T Bastard 1.3.1.1.2

            Not all of us thought that the Tax Swindle would be revenue neutral Marty. In fact, IIRC, there was plenty of comment on how it was impossible for it to be revenue neutral considering that the richest few percent would get far more from the tax cut than what could be raised from the raising of GST which would result in cuts to services.

        • Marty G 1.3.1.2

          anyway, the post isn’t about the vid, I just added it to illustrate the point.

          • felix 1.3.1.2.1

            I agree with everything you’ve written in the post.

            The video on the other hand is stupid, amateur (not in a cool way), and ill-conceived and this type of crap shouldn’t be encouraged from Labour.

          • RedLogix 1.3.1.2.2

            Sadly I have to agree with felix.

            I’ve got memories of a few of my own cringe-worthy stabs at things I should never have taken public.

            To whoever made this clip. I genuinely apprecitate the fact that you pulled finger and made the effort. It’s more than most of the rest of us have achieved. At the same time it wasn’t yet good enough for the public domain. Don’t be put off by our negative reaction, it’s honest criticism, not a personal put-down.

            • felix 1.3.1.2.2.1

              Yes can I just echo that last statement of RL’s, none of this is a personal put down to whoever is responsible.

              Rather it’s that it shows a lack of any coherent strategy from Labour. This stuff should have all been ready to go well before the budget. Numerous versions should have been prepared, with generic elements completed and with different voiceover scripts written and ready for the final recording and editing depending on the specifics of the budget.

              It’s not good enough to wait until after the fact and then release something that’s “just been whipped out in a few hours by a couple of staff”.

  2. Fisiani 2

    The widespread and voluminous praise from virtually all non-biased people for Bill English is for rescuing the economy that Labour had wrecked. Reducing a decade of massive deficits to 5 years. Reforming the tax system to stop the fleecers and rewarding the many hard workers of New Zealand.
    Letting us pay less tax than Australians. Compensating pensioners, unlike Labour, with a 2% rise and a further rise in pensions when the tax cuts come in.
    All this whilst in the worst slump in living memory. Arise Sir Bill.

    • Marty G 2.1

      how did he rescue the economy?

      You pay more tax here than in Aussie if you are on a typical income because Aussie has a tax-free bracket. It’s only the well-off that pay less tax here.

      • Lanthanide 2.1.1

        However I believe Oz has other taxes that hit people, such as stamp duty (applies to cars and land?) and mandatory superannuation. So taking all that into consideration, someone on a lower income may still actually pay less tax than Oz.

    • Draco T Bastard 2.2

      People are, unfortunately, gullible. Blinglish has “rescued” the economy but set it up to fail.

      We were already paying less tax than the Australians. They’re doing better than we are.

      • Draco T Bastard 2.2.1

        Is supposed to read:
        Blinglish has not “rescued’ the economy but set it up to fail.

    • Zorr 2.3

      ummmm… Fisiani… none of what you just listed actually exists in any known reality outside your own demented mind.

      Just a couple of questions that I would like answered:
      Who are the “hard workers” of NZ such that only those earning >70k are going to see any reward?
      Wasn’t Labour criticised during their period of governance for paying down the debt with our surpluses rather than running deficits to give tax cuts?
      Pensioners are facing increased taxes on their savings and the increase in inflation isn’t being met by any increase in superannuation, how are we helping them?

      The price we have paid to “reform” the tax system is to reduce the top rate to that the trusts pay such that their is now no incentive to cheat rather than actually closing an existing loophole.

      DIAF

      • Lanthanide 2.3.1

        I’m really annoyed by all this parroting on about the inflation figure. The inflation figure is blowing out because the GST is going up.

        People are frequently saying that they are going to be hit by higher inflation *and* higher GST, but actually it is one or the other, because the high inflation is caused by the GST. If you are saying both, then you are double-counting the GST portion.

        Because all benefits are rising by 2.02% to offset the GST, this obsession with the 5.9% inflation figure is missing the trees for the forest.

    • Zorr 2.4

      Oh, also, the answer to changing those deficits in to a surplus by 2013/2014 is relying on growth to be at such a level that we will be generating enough tax to close that deficit in spending. There is no room for extra spending and we just have to hope the economy grows in the next 5 years despite no financial sector reform, peak oil and climate change issues.

      • Draco T Bastard 2.4.1

        I remember an ACToid release about such a magical budget as this one. ACT said that if taxes were cut the economy would grow by $10b/year in 10 years and that this growth would cover the tax cuts. On their projected growth pattern it would have taken 16 years for the tax take to get back to where it was before the tax cuts. Meanwhile, in reality, the government would have been under funded forcing the country to borrow.

        This is the basic delusion of NACT – have it now and pay for it later with all the projected growth of the economy. The growth, of course, never eventuates and with Peak Oil here such growth is now impossible.

        • Name 2.4.1.1

          “ACT said that if taxes were cut the economy would grow by $10b/year in 10 years and that this growth would cover the tax cuts.”

          This is economics 101 and can work in certain situations. Tax cuts stimulate the economy providing jobs which increase the tax base and reduce welfare spending, and increases productivity.

          Unfortunately for ACT (most members of which never got beyond economics 101 and think that makes them experts), and New Zealand, it would never work here because the increased demand generated by the tax cuts is spent on consumer items practically all of which have to be imported, so in fact tax cuts here create jobs and stimulate the economies of the manufacturing countries which export to us.

          What New Zealand needs is to boost the value of our exports and our attractiveness to tourists by reducing the dollar to its proper range of US$0.55 – $0.60 and cut our import bill hugely by reintroducing LPG and CNG at half the price per mile than petrol – tho’ some of the slack could be taken up by a fuel tax to fund other oil substitutes we’re going to need within the decade if we’re not going to be held to ransom by BP and Shell.

          • Draco T Bastard 2.4.1.1.1

            Actually, real world experience seems to show the exact reverse. Tax cuts slow the economy down. This is probably due to all the money ending up in very few hands, which don’t spend it, even faster.

            and cut our import bill hugely by reintroducing LPG and CNG at half the price per mile than petrol

            BTW, if you didn’t already know, we don’t have any more gas left.

  3. Doug 3

    If this is Labours best attempt at humour it’s a major flop bit like Phil Goff as Labour’s leader.

  4. Blue 4

    The very idea of giving tax cuts in this Budget was absurd. After all the talk about deficits and belt-tightening and public service-cutting there should have been no tax cuts at all in this Budget, particularly after having already had two rounds of tax cuts already.

    After all the belly-aching from the Nats about using the surpluses to fund tax cuts, as soon as we go into deficit they go on a mad ideological crusade to cut the top tax rate, all the while borrowing and borrowing and cutting public services like mad to fund it.

    The sad thing is, this kind of madness works. Not for the economy, but for them politically. Come Budget day, everyone’s so focused on the size of their tax cut the Nats can slip anything past them.

    Captcha: Millions. Indeed.

  5. outofbed 5

    I have to say I am very worried about The Labour Party and its lack of ability to oppose
    The video illustrates this pefectly.
    Even the Green party with its far fewer resources had its costed alternative budget proposal out there
    (and very good it is too if your from the left)
    I think we all know in our heart of hearts that Phil Goff has no chance of winning the next election.
    Far better for him to go now then in a years time surely

  6. Irascible 6

    Borrow and hope… the motto of the Greek administrations. Perhaps Key & English have hired hot shots from the advisers who put Greece in the can?
    To borrow to pay for lost revenue from tax cuts can only lead to the austerity measures now hitting Greece. Without the support of an organisation like the EU there can be little hope for two little specks in the South Pacific when the effects of this budget begin to bite back.
    There can be no trust in men of little personal and ethical substance like Key and English supported as they are by the asset stripping storm troopers of Hide & Douglas.

    • Draco T Bastard 6.1

      Didn’t Jonkey work for Goldman Sachs (the advisor’s who put Greece in the can) at one point?

  7. Nick C 7

    It really is hilarious that Labours two new biggest concerns are debt and inflation

    Is this the same Labour who want to change the reserve bank act to remove the spesific policy target of inflation, which has seen New Zealand have some of the lowest inflation rates in the world?

    Is this the same Labour who wanted to spend billions to stimulate the economy and create jobs?

    • Nick C 7.1

      To be fair I dont think the video is THAT bad. It does get across their key message that the gains to everyone except the rich will get swallowed up by the cost of living in a novel way.

      I just think its stupid for Labour to be talking about debt and inflation when they have no credibility on those two issues.

      • Pascal's bookie 7.1.1

        Nick,

        On debt: Cullen left the govt books with the some of the lowest debt to gdp in the world.

        On inflation: That’s the job of the RB. All the govt can do is assist through fiscal policy. Cullen ran surpluses, and the right screamed about it as they wanted to cut taxes while the economy was bubbling.

        National’s problem is that if the global economy doesn’t recover smartish, their tax cuts could very easily create structural deficits, which are a whole different kettle of fish from the sort of thing you get with stimulus spending on projects that can be turned off when no longer needed.

        Any way, time to get back to the drinking.

    • Pascal's bookie 7.2

      What’s the inflation rate in the US Nick?

      • Draco T Bastard 7.2.1

        Be nice PB, you know asking a RWNJ for facts will just confuse them.

        • Zorr 7.2.1.1

          “Inflation” in the US currently is negative – deflation if you will

        • Nick C 7.2.1.2

          Yes during the mid 2000’s there was a global economic boom and we ran surpluses. But look at what happened as soon as the chips were down- when labour went out of office the projected debt path of their spending was hitting 60% of GPD and it didnt even peek! Plus since labour has left office they have constantly advocated higher spending. So lets talk about the sort of stuff thats actually relevent PB.

          As for inflation in US i have no idea. But they have a very different system- since the crash in 08 their main monetary policy tool has been quantitative easing- very different from NZ. And the system Phil Goff is advocating will take the focus off inflation.

          Please correct any factual errors i make Draco. But since most of your contributions on this blog are glib, partisan assertions often back by zero understanding of macroeconomics i dont expect you to

          • Nick C 7.2.1.2.1

            I agree with PB that inflation should be (and at the moment is) the focus of monetary policy and not fiscal policy. Which is exactly why labours complaints about high inflation are stupid
            a) there isnt a whole lot national can do about it and even if there was it isnt their job to do so
            b) Labour would be running larger deficits (and therefore higher inflation) as David Cunliffe has admitted
            c) Labour actually want to change monetary policy in a way which likely makes inflation harder to combat.

            • Zorr 7.2.1.2.1.1

              That sound of water falling you hear isn’t the “trickle down” effect, it is the capitalist upper class pissing on everyone below them because “trickle down” is just a nice term for how they take all the wealth and we are meant to be content with the leftovers.

              I have no issue with our country running deficits if the changes in the budget (whether this be an increase in public spending or a cut in taxes or any other number of policies that can affect growth) are actually aimed at improving our economy and getting people in to jobs. However, massive tax cuts for the rich and for business are not actually shown to improve economic performance but are wonderful for making rich people feel better about themselves as they measure their success in pure dollar terms it seems.

              Now, in the interests of openess and honesty, I mostly subscribe to Keynesian economic philosophy but am incredibly open to other ideas. I personally view public spending as an excellent way to dig out of the hole we are in because it provides several incredibly positive benefits:
              1) We improve the infrastructure of our country so that when the global economy recovers we are in a position to reap the rewards of being a country that has a consistent economic vision going forward where the support is already in place for people and businesses to be successful
              2) As a group, we make sure that people are employed in positive and fulfilling roles rather than remaining on the dole during this period. This isn’t “work for the dole” style politics but rather ensuring that jobs are created for our members of our society in the hardest positions by centrally mandating their creation
              3) We create wealth that stays IN NZ. I cannot stress this enough as we seem to be caught in a craze of where, apparently, selling off government assets to overseas ventures is a good idea… why?

              I hold my breath for your reply!

            • Pascal's bookie 7.2.1.2.1.2

              a) what I said was that the govt can assist through fiscal policy, and that Cullen did so. You claimed that Labour had no credibility on inflation, and I was trying to get at what you might have meant by that.

              b) Re-read this …[national’s] tax cuts could very easily create structural deficits, which are a whole different kettle of fish from the sort of thing you get with stimulus spending on projects that can be turned off when no longer needed.

              c) Not as I understand it. What they have said is that maybe the RBA should have a broader focus than just inflation. They are not alone in thinking this, the IMF has been thinking along these lines. You might want to think about the unintended consequences of our RBA.

  8. Nemesis 8

    I’m paying tax so that Labour can hire these amateur clowns to work for parliamentary service? I want my money back!

  9. infused 9

    lol

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