Journalists encouraging irresponsible government policy?

By   /   December 30, 2013  /   11 Comments

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Sorry, John, but precisely WHO is talking about tax cuts?

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John Armstrong - Cutting tax tempting for National

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Sorry, John, but precisely WHO is talking about tax cuts?

Because so far, all I’m hearing is a couple of journos putting the question to Dear Leader and his faithful little side-kick, Lassie Bill English. No one else is seriously contemplating cutting taxes – not when New Zealand’s sovereign debt is now $60 billion as at 9 November this year – and  increasing by $27 million every day since Key’s hopelessly  incompetent government came to power in 2008.

According to Hamish Rutherford, writing for Fairfax Media, this equates to $13,000 for every man, woman, and child in New Zealand – and expected to increase by another $10 billion by 2017.

We need to address this problem – not fuel it by increasing consumption of imported goods, thereby worsening our balance of payments.

For god sakes, stop encouraging National to engage in any further irresponsible slashing of revenue.  National’s two previous tax cuts in 2009 and 2010 did nothing to  help stem the growth in our sovereign debt. Not when revenue fell by up to $4 billion after those tax cuts.

We have other priorities.

For example, why is the Wellington City Mission short of $2 million to carry out it’s valuable work to assist the poorest in our society? It is obscene that the Mission will have to consider reducing some services, as Chief executive Michelle Branney recently suggested.

Why are New Zealand’s poorest families unable to afford basic  medicines since this government-for-the-rich increased prescription charges in January 2013? When National cut taxes, it attempted to make up for the revenue shortfall by raising GST (despite promising in 2008 not to) and increasing government charges such as for prescriptions, Court fees, etc.

Why are New Zealanders needlessly suffering from rare diseases because PHARMAC cannot afford life-giving medication?

Why are poverty-related diseases making a come-back with such a vengeance?

Children’s Commissioner Dr Russell Wills…

… report is expected to reveal a 12 per cent rise from 2007 to 2011 in hospital admissions for poverty-related illnesses such as acute bronchiolitis, gastroenteritis, asthma, acute upper respiratory infections and skin infections.

“Most New Zealanders will find the numbers of children affected by disease shocking,” Wills told the Herald on Sunday, “but for those of us working clinically with families in poverty it is not surprising.”

Wills also works as a paediatrician in Hawke’s Bay. He said hospital wards were now full of poor, sick children every month of the year – not just in winter. There was no longer a “summer lull” in diseases.

English found himself so cash-strapped after their tax cut profligacy that, by 2012, he was even reaching into the meagre pay-packets of newspaper delivery boys and girls to grab extra tax revenue.

Instead of frittering away taxes, we need to be looking at the real problems confronting us;

  • Address child poverty problems

When children go to school hungry because families cannot afford sufficient food after paying high rents, electricity bills, etc. then there is something seriously wrong with our country.

Especially when we are now seeing children eating out of rubbish bins because there is no food at home for them. I refuse to believe that most New Zealanders want this kind of society for their children.

This is not the New Zealand I grew up in.

The next Prime Minister must make this a #1 priority, and begin with taking on the role of Minister for Children and implementing a comprehensive Food In Schools programme (not the shonkey half-measures undertaken by National earlier this year).

Next on the agenda; returning welfare payments to pre-1991-slash levels (inflation indexed); reduce prescription prices for medicine;  and implement a massive job creation programme.

  • Pay down debt

From 2000 to 2008, Clark’s administration not only paid down debt, but also posted Budget surpluses,

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Government Debt

New Zealand Government Debt To GDP

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Government Budgets

New Zealand Government Budget

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To be fair, Labour’s Finance Minister, Michael Cullen did not have the Global Financial Crisis to contend with. But by exercising fiscal prudence –  instead of  tax-cut lolly-scrambles demanded by the then-National opposition – he left the country in a fit state to weather the on-coming financial storm that was about to envelope the planet.

By the time National came to power in 2008, the global financial crisis was well and truly upon us, with the collapse of Lehman Bros on 15 September 2008. The GFC had started earlier, and signs were apparent to all but the most intransigent optimist that dark storm clouds were on the horizon.

As unemployment rose and economic activity slowed, National persevered stubbornly with it’s tax-cut programme – a move that would further indebt this country and put our government’s books back into the red again. At one stage, National was  borrowing $380 million  a week to make up for the shortfall.

This despite the fact that it was common knowledge that we were facing a dire crisis, as Tracy Watkin and Vernon Small reported on 23 April 2009,

The recession was expected to blow a $50b hole in the economy during the next three years, plunging the Government further into the red as costs climb and tax revenues fall.

“That’s $50 billion we will not recover as a nation, and $50 billion that cannot be taxed by the Government,” Mr English told a business audience in Auckland.

And yet, despite his own candid admission, English went ahead with tax cuts that we could ill afford, and had to make up with massive borrowings; cuts to government services; increased user-pays; mass sackings of state sector worker, and eventual partial asset sales. Even welfare was targetted for “reforms” (read; cost cutting) to claw back government spending.

Little wonder that by September 2011, credit rating agencies Fitch and Standard & Poors had downgraded us.

  • Invest in upskilling the unemployed

Why are we importing tradespeople from overseas when we have 7.1% (153,210) unemployment in this country?

National’s response to the skills shortage was this ideological fob-off from Bill English, in June 2011,

In the first place, it is the responsibility of the companies that expect to rebuild Christchurch to ensure that they have the skills.

And to ensure that everyone understood that National was maintaining it’s long-held tradition of shirking responsibility, he added,

Of course it will be tight, because they are competing with very, very large salaries, particularly those in Western Australia where something like $250 billion worth of capital projects are in the pipeline.”

IBID

That’s the problem with a government that places it’s faith in a free market solution to everything (except corporate welfare) – nothing happens.

Wouldn’t it have made more sense to offer free skills training to every unemployed person in New Zealand, along with subsidised accomodation in Christchurch for workers moving from other towns and cities to take up work offers?

There would have been a cost, to be certain. But that would have been off-set by (a) reduced welfare payments; (b) upskilled workers who would continue to use their new training for subsequent building projects; (c) more taxes paid by more employed workers;  and (d) a flow-on effect to other businesses as income-earning workers spent their wages.

The $4 billion frittered away in tax cuts would have made a considerable dent in our unemployment and given a much needed boost to our economy. And by providing work to the unemployed, the government would have saved millions in welfare.

But by sitting on it’s hands and doing nothing, National has maintained the status quo; 160,000 unemployed wasting their time, and requiring more of our taxes to be paid for the dole.

Is this crazy or what?

Hopefully an incoming Labour-Green-Mana(-NZ First?)  will have more sensible policies than what we’ve seen thus far from National. (Which won’t be hard to achieve.)

And other areas which desperately require State intervention,

  • A fairer taxation system, including reducing (or even eliminating) GST; introducing a comprehensive Capital Gains Tax;  looking at a Financial Transactions Tax (or “Robin Hood” tax, as Mana refers to it); making the first $20,000 tax free; and increasing tax for the top 1%.
  • A sensible pricing system for electricity especially for low/fixed-income earners.
  • Increase funding for early childhood education.
  • More state housing, so our fellow New Zealanders have a decent roof  over their heads.
  • Invest in public transport, especially in Auckland, before the city grinds to a stop.

Those are the things we need to look at. Not cutting taxes for the well off (which is usually what the Nats end up doing).

These should be the priorities of a sensible government. Anything  less is grossly irresponsible.

Otherwise, what the hell are we leaving our children?

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debt-mountain-cartoon.

May I have some food, a home, parents

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Postscript

Armstrong’s article on tax cuts features a large image of a smiling David Cunliffe. Note; Cunliffe. Not English, nor John Key.

Is there a subtle sub-text being conveyed here that I’m missing? Perhaps I’m getting the wrong ‘message’ from Armstrong’s piece, especially when he finishes with this intriguing comment,

Overall, English will not want to tie himself to future tax cuts without more solid evidence they can be sustained.”

My… that almost sounds like a veiled warning, doesn’t it?

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References

Bill English: Dr Cullen maintains tradition of tax-cut denial

Wikipedia: Bankruptcy of Lehman Brothers

NZ Herald: Govt borrowing $380m a week

Fairfax media: $50b hole in economy

TV3 News: Double credit downgrade a double blow for NZ economy

Fairfax media: Key ‘no GST rise’ video emerges

NZ Herald: Food parcel families made poor choices, says Key

The Press: Irish rush for quake jobs

NBR: Chch rebuild companies will have to find skilled workers – English

TV1 News: Rise in prescription charges ‘not fair’ – Labour

NZ Herald: Tax cuts: High earners set to benefit most

NZ Herald: Budget 2012: ‘Paper boy tax’ on small earnings stuns Labour

Fairfax media: $4b in tax cuts coming

Dominion Post: Bennett expects welfare reform to save $1.6b

Fairfax media: Public debt climbs by $27m a day

Radio NZ: Pharmacies ‘carry cost’ of increases

NZ Herald: Child poverty ills rising

Fairfax media: Hungry kids scavenge pig slops

Fairfax media: Mum Not Prepared To Wait And Die

Radio NZ: PM defends record of helping poor families

Radio NZ: 5th year in deficit at City Mission

Radio NZ: Funding declined for housing project

NZ Herald: John Armstrong: Cutting tax tempting for National

The Atlantic: Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds

Sources

Trading Economics:  New Zealand Government Debt To GDP

Trading Economics: New Zealand Government Budget

Statistics NZ: Household Labour Force Survey: September 2013 quarter (6 Nov 2013)

Roy Morgan: New Zealand real unemployment down 0.3% to 8.5% and a further 8.6% (down 1%) of workforce are under-employed (5 Dec 2013)

Statistics NZ: 2006 Census

Statistics NZ: 2013 Census

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11 Comments

  1. CFD says:

    Frank,
    What I like the most about your articles is that you follow up with statistics. Not numbers pulled out of the air but actual govt provided tables. Thank you for balancing (what are essentially emotional issues) with facts.

    • Thank you, CFD. I appreciate the vote of confidence!

    • Shona says:

      I’ve been following Frank’s blog for a while now and can heartily recommend getting the email alert’s for his postings. Clarifies mainstream media BS well. He deserves an Orwell prize for his clear insights and links to what’s worth listening to on National Radio.

  2. Kathy says:

    Yes, exactly! Sometimes I think I am going crazy when I hear people defend and support this current Government, especially when it’s coming from main stream political journalists (TV1, TV3, Prime and the Herald, all of which I no longer watch or subscribe to). Then I read read this and I feel relieved because there it is in black and white, what I know to be true, psychologically, sociologically and historically.

  3. ” $60 billion as at 9 November this year – and increasing by $27 million every day since Key’s hopelessly incompetent government came to power in 2008. ”

    Even the use of the word “surplus” implies we have more than we owe ! wtf is with that ? Is this the best an ex-banker can do ,just borrow more money ?

  4. Wayne McIndoe says:

    Thank you Frank, your comments about child poverty are well made, and indeed it is not the NZ I grew up in either. What concerns me is that it does not seem to be a major issue. Look after the children of today and you have protected our major resources and that is our people, remember it is our children who will grow up and be the future leaders and workers of tomorrow. I cannot believe that we have a government that don’t seem to give a hoot about the next generation, and yet we have a Prime Minister, who, when in opposition was lamenting the fact that we have an “underclass”, and it is his government policies which have created more of an underclass than we have ever had.

  5. Matthew says:

    I don’t think anyone in the Beehive is seriously talking tax cuts.

    It would be nice if we were in a position to cut what is an onerous tax burden in New Zealand but the world is still coming out of the GFC with socialist Europe still struggling. The effect of the tax cut to a fairer rate is going to be seen next year when New Zealand is predicted to be one of the biggest growing economies in the OECD.

    Whilst National edges towards a paper thin surplus those on the left are making spending promises all over the show. It is hard to see how a Labour/Greens government would balance the books, even if they were to restore the Income Tax rates to the level under the previous Labour government.

    It is also disappointing you utilise mainstream media reports to perpetuate the myth that inequality is on the rise. The MSM are often derided on this site but you seem more than happy to use them when it suits your means. Sadly the examples the MSM comes up with are easily rebutted, The latest one was a family supposedly stuggling but they had a new child! Go figure. They should have had a photo of the family giving the fingers to the rest of New Zealand because that’s what their attitude was. The rest of New Zealand can pay for our baby,

    Therev are plenty of options available to New Zealanders wishing to upskil themselves. The no interest student loan system is ridiculously generous and there are many courses to go on. Unfortunately the socialist direction New Zealand has headed in has resulted in a generation of lazy slobs. Lazy slobs who wont turn up day in day out to better themselves. Why work when you can rest back on a benefit?

    The policies being advocated have failed in Europe. Why would you follow a path to failure?

    • Marc says:

      “Therev are plenty of options available to New Zealanders wishing to upskil themselves. The no interest student loan system is ridiculously generous and there are many courses to go on. Unfortunately the socialist direction New Zealand has headed in has resulted in a generation of lazy slobs. Lazy slobs who wont turn up day in day out to better themselves. Why work when you can rest back on a benefit?”

      I wonder whether your surname is Hooton, or something like that, as you sound a bit like that person. NZ is a growing economy primarily because of the Christchurch and Canterbury rebuild, and of increased, low value added milk powder, and baby formula exports to China. Those will not last, as China is already bringing in policies favouring local producers and tightening label and other standards for imports of dairy product. So a boom thanks to an earthquake disaster needing lots to be fixed, and thanks to a soon to be shortlived, primary exports boom, to be followed by a nasty bust. As for “socialist” Europe, when were you last there?

      When have you ever been on a benefit, I may ask, as your perception may be that of how it may have been for some on a benefit over two decades ago? It certainly is not a lifestyle choice, and case managers expect job seekers to make at least 20 to 25 application efforts for jobs per week, that is at least in the urban centres. WINZ is making it extremely hard – also for those entitled to benefit support, to even get the foot in the door and make an application. Sick and disabled live in fear now, as they are hauled before biased WINZ assessors, declaring them fit for work, using perverted “methods” imported from the UK.

      Perhaps come back from your time travels and have a sniff of 2013 and 2014 for a reality check? What is “socialist” about New Zealand these days? I am struggling to think of it, with a government supporting private schools and keeping public schools in needs, offering corporate welfare for big players, and giving tax cuts favouring higher earners, while hammering the poor who are more affected by higher GST and many increased user charges and fees.

      But I think you just spit those nasty comments out here, because all you want is to upset people here.

      That leaves you without any credibility for your right wing rant here.

  6. fambo says:

    The trouble is, promising everyone a paltry tax cut will probably be the only convincing a great deal of people will need to vote National. It worked wonders two elections ago – that and a promise of a brighter future. John Key plays New Zealand voters for chumps and so far he hasn’t been proved wrong.

  7. An interesting post, Matthew. Let me address some of your points;

    It would be nice if we were in a position to cut what is an onerous tax burden in New Zealand…

    Actually, Matthew, we have a rate of taxation that is lower than the OECD average. I refer you to this chart on the IRD website: http://taxpolicy.ird.govt.nz/sites/default/files/images/publications/2011-other-bim/figure2.png

    … but the world is still coming out of the GFC with socialist Europe still struggling.

    So is “socialist” United States, I understand. At only 1.5% growth, that’s hardly something to crow about; http://www.nytimes.com/2013/12/06/business/economy/us-economy-grew-3-6-in-third-quarter-revision-shows.html?_r=0

    It is hard to see how a Labour/Greens government would balance the books, even if they were to restore the Income Tax rates to the level under the previous Labour government.

    Hate to disappoint you (nah, not really), but Labour’s track record on surpluses and paying down debt is now well known. Cullen posted only surpluses during his term. English has posted only deficits.

    So. You were saying?

    It is also disappointing you utilise mainstream media reports to perpetuate the myth that inequality is on the rise. The MSM are often derided on this site but you seem more than happy to use them when it suits your means.

    As I’ve pointed out to others, I use information from a multitude of sources. The MSM are only a part of the picture.

    It is also disappointing you utilise mainstream media reports to perpetuate the myth that inequality is on the rise.

    Please provide data to back that up. You seem to be the only one making such a claim (aside from certain National ministers – and who am I to suggest that they’re spinning BS to look good?)

    The latest one was a family supposedly stuggling but they had a new child! Go figure. They should have had a photo of the family giving the fingers to the rest of New Zealand because that’s what their attitude was. The rest of New Zealand can pay for our baby

    ?!

    You base your entire argument on one family’s situation – not referenced, I noticed – without any additional data, information, or stats?

    Do you even know what the stats are for solo-mothers?

    Do you even care?

    I could contrast your anecdote with mine; “Sally”, who used the TIA to get a degree in early childhood education and is now
    employed – http://fmacskasy.wordpress.com/2012/03/06/once-upon-a-time-there-was-a-solo-mum

    I believe mine is more positive and uplifting.

    Therev are plenty of options available to New Zealanders wishing to upskil themselves. The no interest student loan system is ridiculously generous and there are many courses to go on. Unfortunately the socialist direction New Zealand has headed in has resulted in a generation of lazy slobs

    So tell me, Matthew – why aren’t you a multi-millionaire holidaying in the Bahamas?

    There are “plenty of options available to New Zealanders wishing to enrich themselves” – why aren’t you one of them?

    Of course, it would help if Paula Bennett hadn’t canned the Training Incentive Allowance. That was used by solo-parents to up-skill themselves through University; gain qualifications; a job; and escape welfare.

    Unfortunately, Bennett stopped the TIA in 2009 – thereby putting up yet more barriers for people to gain an education.

    But that didn’t stop Bennett herself from using the TIA for her own advantage – plus some. http://fmacskasy.wordpress.com/2011/09/01/hon-paula-bennett-minister-of-hypocrisy/

    Lazy slobs who wont turn up day in day out to better themselves. Why work when you can rest back on a benefit?

    You’re ranting Matthew.

    Stop. Draw breath.

    Do you seriously think that, since 2008, 95,000 New Zealanders voluntarily chucked in their jobs just to go on the dole?

    Do you even know how much the dole is? I bet you don’t – not without looking it up. (Which will Be hard, since WINZ removed that data page from their website.)

    The policies being advocated have failed in Europe.

    Which part of Europe? The Scandinavian countries that have a income per head of population higher than ours?

    Or Greece, where tax avoidance was de rigueur – a national past-time much like our fondness for alcohol abuse and rugby?

    All I get from your post is judgementalism, parroted cliches, and not much else.

    • Matthew says:

      The data you produce regarding the tax burden is from 2008! Accountancy Firm Staples Rodway release an annual report on the number of days work it takes to satisfy their tax obligations. Compared with relevant countries New Zealand hasn’t come out so well. Sadly I don’t think they store their reports on their website.

      The US is looking a damn site more rosy than much of Europe.

      Random fact for the day. Whilst Sweden has low income inequality it has some of the highest wealth inequality in the world. http://en.wikipedia.org/wiki/Sweden#Economy

      Labour was in power whilst the world was on an economic power surge. You can’t seriously compare their fiscal management during that period with the management of National during the last 5 years. It’s like comparing apples with oranges. Had we run surplusses during the previous 5 years our economic situation would be worse than it is now. You don’t save your way out of a recession.

      Wish I had time to answer the rest but I have to go. Look forward to our next discussion.