You’ve got to know to understand (and be able to talk about it)

Written By: Steve Pierson - Date published: 1:15 pm, March 1st, 2009 - 58 comments
Categories: economy, Media, national/act government - Tags: michael littlewood, recession, vernon small

In the greatest economic crisis in a lifetime, we remain the only country in the world whose government has done nothing to try to stimulate the economy. In fact, the net effect of National’s policies is de-stimulatory, taking money out of the economy when it most needs an injection of spending. And I blame the media. You might think that’s unfair, after all National’s in charge but National is just following its ‘put your head in the sand and cut spending’ instincts (the same instincts that aggravated and prolonged the early 1990s and Asian crisis recessions). The only way we could force the Government to act (rather than hold Jobs Summits, which is merely a mask for inaction) is by having an informed national debate on how to handle the crisis. But we can’t do it because the conduit of that debate, the media, isn’t up to the task.

We are so ludicrously under-equipped to hold proper national debates on important issues that when Bill English says he will bring forward spending that is seen as countering the recession and when he says he will cut spending, that is also seen as countering the recession. Not one journo seems to go ‘hey, how can both increasing and cutting spending be tackling the recession?’ or ‘hey, isn’t every other country in the bloody world injecting stimulus into their economy? Why the hell are we cutting spending?’ If you want to see any good commentary on the Government’s recession policies, you have to go to the business sections of the papers, and it’s not favourable reading. The political journos seem unable to sit down and think about macroeconomic situation we are in and what the Government’s actions mean in that context. Many are so economically illiterate that they think running an economy is like running a household budget, and, even then, show they don’t understand the microeconomics of how households budget (John Roughan, don’t you realise that households and businesses borrow to acquire long-term investments all the time? What do you think a mortgage is?).

Look at this cycleway idea. It would be great for me, I could cycle the length of NZ like I’ve cycled through Europe but will it make a blind jot of difference to the economy? Fuck no. $50 million over 2 years. $25 million a year? That’s 0.015% of GDP. It’s like if every man woman and child bought one extra Big Mac a year. It’s supposedly meant to employ 4000 people but what the journos miss is that they would only be employed for a few months each. Even if half the money went to employing workers the number of work hours it would buy is only 1 million over two years, and we lost 17 million work hours from the economy in the December quarter alone. It’s less than a pittance, smaller than an irrelevancy.

Let’s have some context: Obama’s stimulus package is $1.1 trillion – 8% of GDP! He’s talking investment to not only give a mammoth dose of confidence to the economy but also to revolutionise it by building useful infrastructure. He’s delivered a true Green New Deal to not only help the US recover but also to begin to future-proof it against peak oil and work to mitigate climate change. The US and other countries are not spending these vast sums lightly, they are doing it because it is necessary to stop the recessionary spiral before it gets much, much worse. All we’re going to get is a cycleway that no bugger will use and provide no measurable stimulus and yet the media reports it like the Government represents it, as some recession-busting move.

It’s a lack of sophistication in our media analysis that is crippling our politics, preventing any serious discussion over whether the Government is doing anything meaningful to counter the recession, and whether what they are doing are the right things to be doing. If your analysis is no more sophisticated than ‘the Nats say this, Labour says this, and I reckon this’, it’s useless. I can get ‘I dunno, but I reckon’ from any joker in the street. I’m looking for analysis that arises from journos sitting down and thinking about the substantive impacts of policies, that is based on what the research says, what the studies say, what the experts say (the real experts, not the stalking horses like Michael Littlewood); analysis that comes to wise, nuanced conclusions. Informed commentary implicitly recognises the value of knowing what you’re talking about before spouting off. Unfortunately, we rarely get it. Vernon Small’s piece on the Cullen Fund was an oasis that shows the desert around it; the guy actually wrote about the economics of long-term investment, it was informative (well, informative to those who hadn’t already read the same points two days earlier on The Standard). The tragedy is that Small’s piece stands out so much in its exceptionalism. Not one of the other journos has got beyond ‘they say this but the others say this, and the public will feel (ie. I guess) this’.

While our fourth estate remains for all practical intents and purposes incapable of understanding complex issues, explaining them to the public, and challenging our leaders on them, our nation will suffer from poor policy decisions. While the foreign owners of our print media continue to slash and burn our stock of journos and the capable TV journos like Campbell continue to favour entertainment over information, things aren’t going to change.

58 comments on “You’ve got to know to understand (and be able to talk about it) ”

Comments are now closed

coge 1

1 March 2009 at 10:10 am

Ditto the proposed cycleway. It’s just an very expensive sideshow. It would just take money out of the economy, for uncertain return. Plus big money to maintain. With very dubious preliminary costings.
Whoever came up with with that idea I wonder?
Daveski 2

1 March 2009 at 2:09 pm

SP You say a lot by what you leave out.

For a start, NZ doesn’t have the same economic or finanicial problems in the US or UK or other areas ie on terms of cause. We haven’t had threats to our trading banks nor sub prime issues in particular.

I’ve see you blame the Nats for lengthening the early 90’s recession. Yet looking at the GDP stats, NZ was 3 and no more than 6 months behind Oz who in turn mirrored the upturn in the US – in other words, our recovery was consistent with our trading partners and our reliance on trade.

Not once have you mentioned that there is a massive downside to the spending in the US which will take debt to GDP close to our over 100%.

On the one hand you preach that we should invest in our long term (Cullen Fund) but you are equally happy to gift future taxpayers significant debt.

To a large extent, NZ’s recession is linked to the success of the spending in other countries, not NZ’s.
oob 3

1 March 2009 at 2:10 pm

Can you can imagine the response if the Greens has suggested the the Route 1 Cycleway ?
RedLogix 4

1 March 2009 at 2:16 pm

On the one hand you preach that we should invest in our long term (Cullen Fund) but you are equally happy to gift future taxpayers significant debt.

Well of course you leave out the obvious alternative, defer or cancel the planned tax cuts. NZ already has one of the lower total tax takes in the world, and by lowering it even further at this critical juncture, all Bill English would achieve is to further restrict the ability of his govt to respond to the crisis.

Yes I can hear the objection already, that in difficult times tax cuts would help individual budgets, but try and bear in mind that a tax cut means absolutely nothing to an individual without a job. Once someone has lost their job, they don’t give a rat’s patui about tax cuts, all they want is to see some action from their govt to get things moving again.
uroskin 5

1 March 2009 at 2:38 pm

What about the multiplier effect of the cycleway: wayside tyre air filling stations, cafe stops (non fast food), shower heads (solar powered), bunk rooms, restrooms, rain shelters, support transport services (so you don’t have to cycle with a backpack) etc.
I’m surprised the National Government didn’t suggest to uproot the railways, as those tracks would make excellent cycling roadways (cfr Central Otago former rail tracks). And that’d save on future Kiwirail investments too.
- Travellerev 5.1
  
  1 March 2009 at 4:27 pm
  
  There is no going to be any tourists other than some lost Kiwi’s. The entire global economy is collapsing that means nobody has any money to go anywhere let alone to New Zealand.
  That whole project is going to be some monumental waste of time
- the sprout 5.2
  
  1 March 2009 at 9:23 pm
  
  “I’m surprised the National Government didn’t suggest to uproot the railways, as those tracks would make…”
  
  those sleepers would make lovely raised pottager beds for Parnell gardens too.
sdm 6

1 March 2009 at 2:48 pm

So you would rather the government do as Obama seems to be – debt laden the cousntry for generations to come. How does he pay for the “stimulus” (pork) bill?
- Pascal's bookie 6.1
  
  1 March 2009 at 3:22 pm
  
  That would be the same way the shrub paid for his stupid fucking wars sdm. Future taxes. He’s been quite open about it. In fact, he’s finally moved the US towards a proper accounting for how their government spends money.
gingercrush 7

1 March 2009 at 3:21 pm

In the greatest economic crisis in a lifetime, we remain the only country in the world whose government has done nothing to try to stimulate the economy.

That is the most stupid thing I’ve ever read. I love how the left attack the media. You don’t want a critical media. You want media that agrees with your viewpoint. But perhaps its your viewpoint that is incorrect. And that the huge stimulus packages other countries are delivering will only put those countries further and further into debt. And when Obama is talking about cutting the US deficit in half. One can only assume there is going to be plenty of cutting to public services. Something I would have thought you would disagree with.

As for borrowing for the super fund. Its rather surprising that the Greens the party which aligns closest to you, also agrees with the suspension of funding the Cullen fund. It makes no sense to borrow money to invest largely in sharemarkets at a time when those sharemarkets are going down, down and down.

And its pleasing to see, The Standard is quickly going down the same route as Tumeke. It looks so professional to see swearing in an analysis piece.
- Quoth the Raven 7.1
  
  1 March 2009 at 7:07 pm
  
  Was Tumeke ever any good?
Ianmac 8

1 March 2009 at 3:24 pm

The cycleway gets a great deal of debate BUT I can find no mention of it in the official report on the official Govt Summit website nor on Tracey Watkin’s front page Dominion. (Wouldn’t it be Wonderful to be able to bike the lengh of NZ safely. Wow! Loved the Otago bike trail.)
Ianmac 9

1 March 2009 at 3:27 pm

Cullen Fund: Doesn’t it make sense to invest when the value is low so it is ready for the long-term recovery
gingercrush 10

1 March 2009 at 3:35 pm

Ianmac – No. It is generally advised that you never borrow money to invest in liquid stocks. And the best time to invest in stocks is when you’re starting to see a recovery. That insures that your stock doesn’t drop too low. Of course we could always borrow 20 billion dollars + but the only thing that will do is make the Cullen Fund irrelevant in 20 years or so since the country will paying for all it takes to pay off debt. That is why it is the best interest of this country, to ensure that government debt remains low. So a fund that is suppose to pay for future Super isn’t used to pay off Government debt. If we’re indeed looking at a future where a large number of people are retired. Then surely by anyone’s thinking its best to ensure government debt remains low? Or do you people really think a fund of lets say 20 billion dollars but a debt of 30%+ of GDP is going to ease financial constraints?
spot 11

1 March 2009 at 3:55 pm

“He’s delivered a true Green New Deal to not only help the US recover but also to begin to future-proof it against peak oil and work to mitigate climate change….”

That has to be worthy of a post on its own, quite some claim when you look at the category breakdown of that package.
Daveski 12

1 March 2009 at 4:00 pm

RedLogix

Isn’t SP clamouring for what they’re doing? So doesn’t that mean tax cuts (cause that’s what they are doing)?

The philosophical point is that you and SP want to see the Govt spend and make the decisions … even tho govts have a terrible success rate. Likewise the enthusiasm for the Cullen fund.

Wouldn’t it make sense for the Govt to give this money back to taxpayers and only have to worry about supporting those in genuine need. FFS social welfare for families earning $100K +!!!
- Ari 12.1
  
  1 March 2009 at 4:28 pm
  
  The reason tax cuts don’t work well as stimulus is twofold:
  
  1) They’re inefficient- you have to spend an enormous amount on them for a relatively small stimulus, because tax cuts go to everyone in the economy.
  2) They’re poorly targeted- tax cuts also give money to the wealthy and those secure in their jobs, and often it’s a lot more money than for everyone else. These people are almost guaranteed to bank the extra cash rather than invest it, which is about the worst possible use of money if your goal is to get out of the recession.
- Draco T Bastard 12.2
  
  3 March 2009 at 12:18 pm
  
  If families with an income over 100k need social welfare then it’s most likely that they don’t have a high enough income. Now, it would be nice to see businesses actually paying enough for the families to thrive but I really can’t see it happening. WfF – just another business subsidy courtesy of the taxpayer.
Pascal's bookie 13

1 March 2009 at 4:13 pm

“FFS social welfare for families earning $100K +!!!”

Daveski.

I think it’s fair to say that, of late, many of your comments here have been along the lines of;

” Goodness me (Standard writer), your comment “x” is rather partisan, and is hardly an objective statement that could be accepted as true by everyone, and your credibility is in grave jeopardy.”

Given your above quote, please desist with the concern trolling.
- Daveski 13.1
  
  1 March 2009 at 9:52 pm
  
  I got riled when I pointed out comments that had been trotted out as fact were proved to be wrong and banged on about it for a while. Even I got bored so I desisted.
  
  Ironically, Ari’s comments are along the same lines as the point I’m making – a lot of the current transfer payments aren’t well targetted at all.
  
  I’ve moved on from the boring line of attack – point taken – but the comment about targeting welfare payments is a first for me and not trolling action.
Rex Widerstrom 14

1 March 2009 at 5:11 pm

I couldn’t agree more with the main thrust of your post, SP – the media in NZ aren’t equipped for a national debate of any depth. But then you go on to say:

capable TV journos like Campbell continue to favour entertainment over information

Sorry, but it’s journalists like Campbell who are equally responsible, along with the owners, for the malaise that infects our media. Certainly the jobbing journo in the Herald newsroom whose value to the company is measured in column centimetres, not the quality of the words therein, can’t do much to change things. They’re not given the time or resources for any analysis.

But when one reaches the exalted heights of being handed 30 or 60 minutes of prime time TV a night, or a bylined column, or is promoted to head of news or whatever, then one wields considerable influence.

If you’re so wrapped up in your own celebrity you’re bereft of a decent idea, then there are plenty of good overseas examples you’d do well to copy.

It’s easy to blame the media owners, and they certainly don’t make it easy. But once a program is allocated a budget, then the decision on whether to spend that budget on recipes, interviews with aging rockstars and lightweight “lifestyle” pieces, or serious current affairs, is in the hands of the program makers.

And they’ve consistently let us down.
- Pascal's bookie 14.1
  
  1 March 2009 at 5:20 pm
  
  spot on. (now there was a show. never mind the top-town, re-make that for the kiddies)
- Ag 14.2
  
  1 March 2009 at 7:31 pm
  
  The internet has exposed how useless most journalists are. To be a journalist one has to be able to package either the conventional wisdom, or something close to it, in a non-threatening package. Now anyone with an internet connection can fact check and publish objections immediately, and the journalists don’t like it. But why on earth would someone take a journalist’s opinion on any subject when there are any number of blogs by real experts that anyone can read?
  
  No wonder newspapers are going out of business.
- the sprout 14.3
  
  1 March 2009 at 9:29 pm
  
  True RW, Campbell disappeared up his own arse a long time ago. No amount of carefully staged Everyday Johno marketing eating fish and chips on the couch is going to change that.
mike 15

1 March 2009 at 5:22 pm

“The entire global economy is collapsing that means nobody has any money to go anywhere let alone to New Zealand.”

Yes and we’ll all be wearing goat skins huddled around the camp fire… just what the country needs at this time – more paranoid freaks like eve
- Travellerev 15.1
  
  1 March 2009 at 8:14 pm
  
  Mike,
  
  You might not like what I’m saying but to date 50 million people lost their jobs in the last six months and it’s only just beginning.
  Every major city in Europe has riots and strikes, government are falling and the people are angry. The way this is going to go down you might be lucky to have a goat skin and a fire. Asshole.
  - TC 15.1.1
    
    1 March 2009 at 9:56 pm
    
    @Travellerev,
    
    Every major city in Europe has riots and strikes??
    
    Which Governments are falling??
    
    Maybe the sky is falling!!
    - Travellerev 15.1.1.1
      
      2 March 2009 at 2:48 am
      
      TC,
      
      This is about Eastern Europe.
      
      This one is about Europe
      
      Iceland”s and Latvia’s governments have fallen, Greece’s government is under severe pressure.
      Germany is facing huge strikes
      
      For details about the collapsing banking system check the bank implodometer
      
      Yep, the sky may be falling and ignorance is an ugly thing in these times. TC, you might want to educate yourself because the only country in the world which was dumb enough to vote an actual banker in, instead of throwing him in front of a car is little old really, really dumb New Zealand and my guess is you’re one of those dumb fucks who actually voted for him.
Steve Pierson 16

1 March 2009 at 6:21 pm

Rex. oh, I totally agree with you. It is a personal as well as institutional failing that people like Campbell have wasted their potential.

Daveski. Only very large families (6 kids) get any WFF on incomes over $100K, and the payments are small. It came out a while back that the government was spending only a million a year on WFF for these families, $1000 each. Do the maths and stop being a dick, the only way your can avoid having small payments into high incomes is a greater abatement rate or lower rates at low incomes. Remember Bill English’s secret tape? He said Key didn’t understand that simple fact but there’s no getting around it.
- Daveski 16.1
  
  1 March 2009 at 10:35 pm
  
  My comment has been taken somewhat out of context. The point I was trying to make is that the “safety net” provision of social security which I completely support has been replaced by a complex web of transfer payments that will never be efficient. The broader point I obviously failed to make was around better targetting of govt payments rather than the Government throwing money at every problem in the short term – it hasn’t worked in the past.
Walt 17

1 March 2009 at 6:30 pm

According to this ODT article the proposal is to spend $6 million finishing Te Araroa which is a walkway from Cape Reinga to Bluff due to be completed in 2010 and then build a mountain biking trail alongside of it for a cost of $50 million.

I know that at (at least) parts of Te Araroa are accessible by mountain bikers: the parts of the trail near Twizel have been mentioned in the last two editions of the Kennett Brother’s Classic New Zealand Mountain Bike Rides guide book (i.e. since 2005) and I found this information about sections of the trail in the Auckland area.
tsmithfield 18

1 March 2009 at 9:13 pm

SP “when Bill English says he will bring forward spending that is seen as countering the recession and when he says he will cut spending, that is also seen as countering the recession”

Yip. We need to spend on useful things and cut spending on stupid things. So, it is possible to be increasing spending and cutting spending at the same time.

Think about it. It as actually cheaper for taxpayers to be paying former government employees the dole than to have them paid high salaries from the public purse. So, cutting the fat at of the public service, as National is doing at the moment, is actually good for taxpayers as a whole.
the sprout 19

1 March 2009 at 9:20 pm

Good commentary SP. agreed on all points.

Our ‘Fourth Estate’ is a bad joke if you think what that’s supposed to mean – a citizens’ watchdog on the powerful interest of the State. Only the conglomerates that now own our media are more powerful than probably our state, definitely more powerful than any political party or bloc.

Our print media in the past have pretty much always been owned by wealthy families, but at least they lived in the same country and had to wear some of the consequences of theri decisions. Now the offshore owners of our private media couldn’t give a toss about what happens in the far off Antipodes.

The NZ msm were desperate to downplay the seriousness of the Global Crisis during the election because they didn’t want to risk the public getting cold feet about trading a competent government on a whim for a change. With that level of concern for the democratic interests of New Zealanders it’s hardly surprising they’re not going to bother too much about hiring staff that are sufficiently competent to provide adequate journalism.
rave 20

1 March 2009 at 9:24 pm

The reason that there is no stimulus package in NZ is that National are not Keynesians. They are not interested in boosting consumption to increase demand and hence supply. They are supply siders. They will take their tax cuts and subsidies and only invest if labour and other costs of production are cut to the bone via the 90 days fire at will, gut the RMA, dispense with ETS blah blah and suck Cullen’s fund dry.

Obama’s so-called stimulus is a mixed package and it barely qualifies as a New New Deal. Most of the public spending is a direct subsidy into the pockets of the bosses (no guarantee of stimulus) much less goes into increasing consumption. Mind you that was true of the original New Deal anyway.

What Key and Obama have in common in a concern that if they don’t present their package as pro-jobs first then popular unrest will mount and destablise actual pro-boss policies. As I pointed out on another thread, the 9 day fortnight is not pro-worker but pro-boss because it is in fact a form of creeping dole paid for by the labour and taxes of workers. But Key hopes that it will cool out the union heads and keep the lid on worker discontent more than 1000s of unemployed queuing up at WINZ.

I thought the The Standard contributors really believed that Key’s centrist posing was designed to mask a real right wing hidden agenda. Why question that conclusion when the evidence is piling up in its favour?

Sooner or later you’ll get it that this is a capitalist crisis that they want workers to pay by cutting wages and cutting all unproductive and unprofitable investment.

I think its a bit weak to blame the corporate media who have been sold out for years, bullshitted us before the election and are playing Key’s little game consistently now.
- Travellerev 20.1
  
  2 March 2009 at 2:25 am
  
  This is what the man had to say about the financial collapse at APEC
  
  So now the party is over and the taxpayers of the world are left to underwrite in one form or another the liabilities and obligations of banks and, by extension, their hedge-fund clientele.
rave 21

1 March 2009 at 9:54 pm

How Obama plans to rescue Citibank without nationalising it.
http://doughenwood.wordpress.com/2009/02/26/obama-coddling-bankers-indeed/
deemac 22

1 March 2009 at 11:33 pm

top stuff Steve, thanks. Can you remind us of the percentage of GDP that various govts are devoting to rebooting economies? then we can see how truly clueless our sorry lot are.
vto 23

2 March 2009 at 12:19 am

rave you almosy made compleye sense again.
sweeetdisorder 24

2 March 2009 at 1:05 am

Deemac

“Australia’s stimulus spending announced since September 2008 now totals A$78 billion and adds to a raft of packages developed in major economies, including $819 billion in the United States and $586 billion by China.”
http://www.cnbc.com/id/28985020

****
Hon David Cunliffe

Has the Minister seen any reports on the comparative size of the stimulus injected by the so-called rolling maul of announcements, of which today’s infrastructure package was one; if so, can he confirm that although the Australian Government has introduced stimulus initiatives of about 4.5 percent of GDP, and the US of about 5.5 percent of GDP, this Government’s stimulus initiative in this package makes up less than 1 percent of GDP?

Hon BILL ENGLISH

As the member will know, New Zealand has a significant fiscal stimulusâ€”at least in comparison with the Australian and the US Governmentsâ€”of around 4 percent of GDP over the next couple of years. The difference is that New Zealand went into recession 12 months earlier than those Governments, under the previous Government. The 2008 Budget cut taxes increased spending significantly, which means that by now, when the recession is deepening, the New Zealand Government unfortunately has a lot fewer options than those Governments.
http://theyworkforyou.co.nz/portfolios/infrastructure/2009/feb/11/economic_challenges
****

NZ’s is reported to be around $NZ9bil, about 4% of GDP
http://www.stuff.co.nz/4844707a6160.html
oob 25

2 March 2009 at 7:40 am

Merrill Lynch CEO Thain Spent $1.22 Million On Office
http://www.cnbc.com/id/28793892/site/14081545

unbelievable
Tim Ellis 26

2 March 2009 at 8:24 am

I don’t know what National’s tax cut programme is, if it isn’t a stimulus package. You know, the same tax cut programmes that Labour said was only marginally larger than their own, but Labour have since said they would scrap and are proposing that National scraps theirs.
Pascal's bookie 27

2 March 2009 at 8:31 am

Jeez Tim. National have been banging on about tax cuts for nearly a decade. It’s ideological for them.

When there is a surplus, National wants tax cuts to ‘pay it back’.

If there is recession, tax cuts become stimulus.

If there is a govt deficit, but no recession, supply side laffer curve nonsense about ‘cutting taxes to increase revenue’ gets trotted out.

IOW ‘what National’s tax cut programme is’, depends on what they are justifying it by this week.

As you yourself once said, but couldn’t really explain, it’s about ‘believing in tax cuts’.
- Felix 27.1
  
  2 March 2009 at 10:24 am
  
  As you yourself once said, but couldn’t really explain, it’s about â€˜believing in tax cuts’.
  
  Oh come now Pb, you can’t hold him to that – it was before the election!
Chrisburger 28

2 March 2009 at 10:13 am

Hang a tick.

Didn’t right-wing, neo-liberal parties win a majority of the vote at the 2008 election? Forgive my ignorance, but I think that kinda translates into the majority of New Zealanders choosing an ideological approach geared towards fiscal restraint, even in the hard times (we had been in a recession for almost a year at the time of the 2008 election).

So to bang on now about our government not spending up large like other countries is a little like refighting the last election, which the Left lost. It’s pointless – Kiwis made their decision.

What’s impressive about the reaction by the government so far has been its remarkable restraint amid the temptation (primarily for electoral gain) to lavish money here, there and everywhere, further burdening future generations with an enormous load of debt just when they are supposed to be funding the boomer’s retirement (not to mention pay off their student loans).

I do, however, beleive that contributions should continue to the Cullen Fund. Money going in now will be purhcasing shares aborad at much lower prices than the money put in 3 years ago (terrible timing by Cullen, again – is this guy really that bright?), illustrating the wisdom of the mantra of buying in a bear market.
- Felix 28.1
  
  2 March 2009 at 10:21 am
  
  Didn’t right-wing, neo-liberal parties win a majority of the vote at the 2008 election?
  
  Yes, by promising not to be right-wing neoliberals.
  
  …but I think that kinda translates into the majority of New Zealanders choosing an ideological approach geared towards fiscal restraint, even in the hard times…
  
  No. See above.
  
  Forgive my ignorance…
  
  You are forgiven.
Tim Ellis 29

2 March 2009 at 11:15 am

That’s not the point though, is it, PB? The point is that tax cuts are stimulatory (and one of Cullen’s excuses for not pursuing with tax cuts earlier was that it would provide too much stimulation in a hot market), and should be considered as part of National’s stimulatory package. National’s tax cuts are more aggressive than what Labour promised. Given Goff has now said that National should cancel tax cuts, what he’s saying is that the stimulatory effects of the tax cuts should be removed, which is the very opposite of what Steve is advocating here. If you’re going to consider the stimulatory package then that includes both tax cuts and additional spending.

Goff has called for super contributions to remain. That also removes stimulus from the economy.

[The NZSF contributions are not destimulatory because they’re not coming at the cost of spending in the economy. Removing the tax cuts would be destimulatory but I’m adovating using the moeny on spending instead, whcih would be more stimulatory than tax cuts for the rich. SP]
Pascal's bookie 30

2 March 2009 at 11:39 am

It’s often hard to tell what your point is though Tim. As far as I can make out, it’s “Tax cuts are good, National believes this, therefore vote National”. Everything else seems to be sophistry in service of that claim.

(and one of Cullen’s excuses for not pursuing with tax cuts earlier was that it would provide too much stimulation in a hot market)

And he was right. Now that you are lauding the keynesian effects of tax cuts, I’m sure you’ll be happy to admit as much.

National’s tax cuts are more aggressive than what Labour promised.

They are slightly bigger, and differently targetted. Whether or not they are more stimulatory than Labour’s depends at least as much on the latter as the former. Which is the point.

I don’t really care what Goff is saying.
RedLogix 31

2 March 2009 at 11:44 am

The point is that tax cuts are stimulatory

Only if they are spent. But in the current environment, with asset values collapsing, the highest priority for most people will be to reduce debt. Which has no stimulatory value at all. The rest of your train of thought falls apart after that.

We are at the beginning of a massive debt deflationary period. These things are rare, occuring only once ever 70-80 years or so. Most of what we know from our recent past will prove misleading or wrong in the next decade.

Goff has called for super contributions to remain.

I never thought I would say this, but increasing debt by borrowing expensive money to buy depreciating assets is probably counterproductive at this point in time. National could get away with suspending the Fund (as the legislation explcitly allows), if it also laid out acceptable conditions that had to be met in order to restart them. Simply suspending the Fund with open-endedly would be widely perceived as killing the political accord around Super, and added to their already long list of reprenhesible moves in this area.
Tim Ellis 32

2 March 2009 at 11:49 am

SP wrote:

The NZSF contributions are not destimulatory because they’re not coming at the cost of spending in the economy.

That isn’t true SP. Governments have three options: adjust tax, adjust spending, and adjust savings/debt levels. Increasing savings levels as the super contribution does removes spending on the economy.

PB, I’m not strictly speaking a Keynesian, but I take your point. Yet I’ve never said that the only positive effect of tax cuts, or that the only time to do it, is when there are large surpluses. I would argue that one of the positive effects of tax cuts is that they stimulate the economy in a downturn. Yes that’s a Keynesian argument but it’s not the only one. Labour claimed that the main motivation for its tax cuts were that surpluses were “structural”. That’s turned out to be patently wrong.

I should clarify I’m not asking you to justify Labour’s policy. My point is though that the electorate has two broad political options in Labour or National. We don’t have a lot of an idea of what Labour would do in the current climate, except for the statements made by Phil Goff: cancelling tax cuts and maintaining super contributions, both of which probably have a more destimulating effect on the economy than anything else. I haven’t heard much of what positively stimulating policies Labour might have pursued, but given the options it seems to me that National’s plan has a more stimulating effect than Labour’s.
Steve Pierson 33

2 March 2009 at 11:51 am

Chrisburger – National got 45%, ACT 3.65%. Not a majority, a plurality.

Anyway, just because the majority of people back something does not mean it is correct or above question. I’m certain you have views that the majority disagree with but that doesn’t stop you making your arguments.
Snail d' silver trail 34

2 March 2009 at 8:14 pm

some bright remarks in there, rave.. like “supplyside”.. bang on before election, government and recession responsbilities at any rate.. a reagan coining as you’ll know.

Media deficiency.. insuffociency..? The solution to which lies in how they can be made to think about and write sensible, sensitive and intelligent copy for folks to take up..

Well, here’;s something. I’ll relate it as a start: a way of figuring things.. of stating a progessive line.. futures.. sustainable and not fall-overs..

Governing Labor (Labour) has a name of being control freaks. National need a different mindset. Control… what?

The new National – whether they like it or not, know it or not – operate twixt price and risk. Best risk is the priced risk. No price = uncertainty. Uncertainty is too much risk. Recession is risk!

Yep, do more than just think about this.

ps: once was northpaw, but I was ‘touched’ the other day and henceforth until further notice my monicker here shall be Snail.. One thing is for sure.. folks will always know where I have been nights by following the silver trail by day. 🙂

pps: has anyone else noticed how the enzed bonds market is shaping out..

.
mickysavage 35

2 March 2009 at 8:43 pm

The really sad thing about this debate is that Barack has set aside US$100b on green measures. China has decided to put a third of its stimulus package in sustainable energy projects. And our wise leadership has chosen to reverse the ban on energy inefficient lightbulbs…

It really feels like the stupid members of your third form class have taken over and are deciding what in intellectual terms is right and wrong ..
MsMac 36

7 March 2009 at 1:51 pm

“…a true Green New Deal to not only help the US recover but also to begin to future-proof it against peak oil and work to mitigate climate change.”

Yeah, right. For example, our lovely stimulus package has $1.7 million dollars for pig odor research in Iowa. Everyone knows that stinky pigs are absolutely prohibitive to a US recovery!

This is only a very small example of all the great stuff (AKA PORK!) in the US stimulus package.

I’m moving to Canada!
- Ianmac 36.1
  
  7 March 2009 at 2:25 pm
  
  Isn’t that part of the urgent need to deal with the huge problems associated with the mammoth USA pig farms? A decade or so the 1000s of pig farms were small family type concerns. Vast pig farms, I think about 50 now, have the entire production wiping out all the small units. But the environmental impact; smell, effluent pigshit, heavily poluted rivers downstrea, was catastrophic for many miles around. imagine a pigfar the size of entire Auckland city! (The Bush Admin removed environmental restrictions and hey! Here we have the reform of the RMA????) .
  - MsMac 36.1.1
    
    8 March 2009 at 6:04 am
    
    The project is truly about reducing the odor, not the environmental impact. Non stinky pig poo is just as bad on the environment. This isn’t some much-needed project that’s going to fix the nation or even the environment. It’s a wasteful pet project aimed at getting some Democratic in Iowa re-elected. That is what the US Stimulus package is all about keeping the Democrats in power.
expat 37

8 March 2009 at 6:23 am

[lprent: deleted – troll comment]