Tracy Watkins – Getting it half right on the “Decade of Deficits”

By   /   May 10, 2018  /   22 Comments

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Writing in the new, tabloid compact-sized Dominon Post on 2 May, political columnist Tracy Watkins mentioned the oft-parroted cliche from the Right, the so-called “decade of deficits”;

“Labour spent years in the wilderness after the global financial crisis gave it a “decade of deficits” as its legacy.”

Watkins left out a crucial factor in National’s ongoing deficits – a fact to be pointed out;

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Writing in the new, tabloid compact-sized Dominon Post on 2 May, political columnist Tracy Watkins mentioned the oft-parroted cliche from the Right, the so-called “decade of deficits”;

“Labour spent years in the wilderness after the global financial crisis gave it a “decade of deficits” as its legacy.”

Watkins left out a crucial factor in National’s ongoing deficits – a fact to be pointed out;

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from: Frank Macskasy
to: Dominion Post <letters@dompost.co.nz>
date: 5 May 2018
subject: Letter to the editor
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The Editor
Dominion Post
.

Tracy Watkins’s recent opinion piece referred to “decade of deficits” as Labour’s “legacy” in 2008 (1 May). She fleetingly mentioned the Global Financial Crisis as a contributing factor. English himself called the GFC “the deepest, most synchronised recession since the 1930s”.

Nowhere did Watkins mention that Labour’s finance minister paid down this country’s government; posted eight surpluses in a row; as well as funding long-term initiatives such as Working For Families (essentially a tax cut) and NZ Super fund.

Watkins resurrected the tired old fictional trope of Labour’s “first budget is all about playing to the wider masses to show it can be trusted with the chequebook”.

What was also missing was another crucial contributing factor to the so-called “decade of deficits” – a term first coined by former PM, John Key and National’s pollster, David Farrar, in October 2008.

The missing factor were the tax cuts of 2009 and 2010, which reduced government tax revenue by several billions of dollars. The 2010 cuts alone slashed tax revenue by an estimated $2 billion pa.

A Regulatory Impact Statement from Treasury, dated 9 December 2008, warned National;

“With a deteriorating global economic out look New Zealand is expecting weaker economic growth in the next few years, resulting in slower tax revenue growth and increased government expenditure.”

National borrowed billions to make up the shortfall – in essence funding taxcuts through offshore bankers.

So who is it that cannot be “trusted with the chequebook”?
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-Frank Macskasy

[citations, address, and phone number supplied]

 

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References

Fairfax:  Why Labour isn’t about to fall for the ‘spend more’ honey trap

Fairfax:  Tax cuts off as Govt fights recession

Kiwiblog:  PREFU – Ten years of deficits

Fairfax media:  Nats blame Labour for ‘decade of deficits’

Infonews: Government’s 2010 tax cuts costing $2 billion and counting

Treasury: Regulatory Impact Statement – Changes to Personal Tax, the Research & Development Tax Credit and KiwiSaver

Additional

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

Previous related blogposts

That was Then, This is Now #19 – A “Decade of Deficits”

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22 Comments

  1. Keepcalmcarryon says:

    You are too kind Frank. Watkins isn’t half right she’s a fully blinkered right wing parrot.

  2. CLEANGREEN says:

    “Labour spent years in the wilderness after the global financial crisis gave it a “decade of deficits” as its legacy.”

    Yes Frank; – and the ‘slash + burn National Party Policy’ has left us all ‘skinned to the bone’.

    Labour has yet to wake up and finally do what Winston requested they do; fund the infrastructure with low cost Government funding under the public works act and use The reserve bank act as china and many other counties have as labour did when they first entered the political scene in the 1930’s during the last deep depression when Michael Joseph Savage begun using the reserve bank Act to print their own money to fund infrastructure projects badly needed as they are now.

    Today we hear on RNZ that the rail workers union has warned Labour that they are about to break yet another promise ‘to make rail electrified by 2035 because Kiwi rail say they are not being funded to buy any electric locomotives for the Auckland Hamilton main line to replace the older electric locomotives.

    Now labour!!!!!!

    How are we going to really sell the truly “clean green freight/passenger service if you don’t get electric locomotives?

    Jacinda will not save our future this way with “her generation’s nuclear moment” – will she?

  3. e-clectic says:

    They keep trotting this out like it’s some kind of self-evident truth, axiomatic.

    Occasionally though, there is an acknowledgement that Labour did an OK job.

    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10548753

  4. Michelle says:

    I don’t think much of tracey Watkins opinions or work and your right Frank nationals track record is dismal to say the least. We are in more debt and they spent the 6 billion on the earthquake and we still need millions possibly billions more to fix the mess they left and the peoples lives they destroyed in Christchurch. And to blame the GFC when they dished out billions to appease a small group. Now we have the spiteful gnats trying to act like they have social conscience when really they don’t give a damn its all about them and their constituents.

  5. Mjolnir says:

    The narrative of the Nats being expert fiscal managers has been spread unquestioningly by a lazy, complacent mainstream media. Which aids the Nats’ re-election chances.

    All the evidence though points to National being fiscally irresponsible when it comes to election year taxcut bribes. This ensures the Nats are never questioned, or rarely at least, while every single dollar spent by a Labout-led govt is scrutinized with the political equivalent of an electron microscope.

    Where is the media scrutiny how much those tax cuts in 2009 and 2010 cost us? Nowhere. The only analysis seems to have been done by Frank. Poor form, msm.

  6. Gosman says:

    Frank we have been through this. The 2008 PREFU (i.e. BEFORE National took office) predicted the decade of deficits. This was based on the spending and revenue plans locked in under Labour at the time.

    • Yes we have.

      No it didn’t.

      The 2008 Prefu does not refer to a “decade of deficits” – that term originated from Messrs Key and Farrar (citations given above). References in the 2008 Prefu deficits relate to the Global Financial Crisis. A fact you seem unwilling to acknowledge, Gosman, despite it being clearly written. (And taking a comment out of context when it applies directly to a comment referring to the GFC in a previous chapter is not the best way to present your case.)

      You know I’ll check up on what you offer as evidence.

      • Gosman says:

        I’m sick of your pedantry Frank. Yes the phrase “Decade of Deficits” is not mentioned in the 2008 Prefu. Noone is arguing it was in there. What IS in there is a detailed breakdown of Governments deficits from 2008 out past 2018. They are all in deficit.

  7. Observer Tokoroa says:

    Twisted

    What is it about National that it begins and ends in Deceit ?

    The Falsehood Party, aided and abetted by the wretchedly untalented Media.

    Next we will hear from Tracy about the recent ten Decades of Auckland Infra Structure. And the discovery of five new Lively adult Moa in John Key’s house in Parnell.

    Complete with the ever unconvincing Farar talking splendidly to the Moa
    in advanced Hootonese.

  8. Sam Sam says:

    I remember desks at the dominion post used to be full as. Now you’d be lucky to fill half the desks. Desperate, oh my.

  9. Rodel says:

    I’m surprised that Frank Macskasy or anyone still reads anything written by Tracy Watkins. Slater and Donald’s Huckaby Saunders are probably more believable.

    • Unfortunately, Rodel, other members of the public do read Ms Watkins’ columns.

      It appears the Dominion Post has declined to publish my submitted letter.

      • Louis says:

        So the Dominion Post has no journalistic integrity and is willfully peddling a lie.

      • mosa says:

        The fact that the Dom Post did not publish a very well written counter argument to Watkins and her slated anti left propaganda diatribe shows once again why we need a major revamp on the way the media operates and the lack of fair and balanced reporting that we should be entitled to with the fourth estate.
        Will this coalition government really make the necessary changes needed….probably not.

        Watkins is so John Key obsessed that she can not write an article on anything without mentioning him in it.

        Well done on your response Frank , at least we can read it on the T.D.B

      • CLEANGREEN says:

        Dominion Post is in a very sad place as I used to believe in the honesty of that media.

        Hope they finally print your excellent letter Frank.

        We are so grateful for your continued efforts and gripping insight, so please keep it up.

      • Rodel says:

        Sorry Frank I didn’t mean to sound critical. Of course you have to read Ms Watkins propaganda in order to counter it. Me-I now see the name Watkins and simply ignore.

        • No probs, Rodel. It’s hard to get the tone of conversation with just text.

          Hopefully, though, the people in question take note of the (hopefully constructive) criticisms I, and others, make…

  10. Tuan says:

    What Exactly is a New Zealand Government Budget Deficit?

    A budget deficit is errantly defined by the mainstream economists as when the government spends more than its income. This is simply not true, because, at no point in time, does the New Zealand Government have an income. Factually, a budget deficit is the difference between the number of dollars manufactured and spent by the New Zealand Government and the number of dollars destroyed afterwards through taxation in any given fiscal year. Mathematically, we can express a budget deficit as (G – T > 0), where government spending (G) minus taxation (T) is greater than zero.

    On a daily basis, the New Zealand Government is crediting bank accounts with newly manufactured dollars (spending), and it is also removing dollars from reserve accounts (taxation) that the New Zealand Government previously manufactured and spent. All government spending comes before taxation; not the other way around. If the number of dollars manufactured and then disbursed into the economy are greater than the number taxed out of the economy, then a budget deficit exists. Operationally, the reality is that a budget deficit is income for the private sector.

    In order to demonstrate this reality, we must clarify sectors within the economy and familiarize you with the difference between the New Zealand private sector and the rest of the world. The point of what follows is not to inundate you with math, but to demonstrate to you that we aren’t dealing in guesswork and thus, we can clarify the reasons why the monetary system works in the opposite way than that which the mainstream tells you. Do not panic. You won’t be asked to calculate anything.

    There are three major sectors to the New Zealand economy:
    (G – T) = the government sector
    (S – I) = the New Zealand domestic private sector (you, me, Spark, Kiwi Bank)
    (X – M) = the external, or foreign sector (the rest of the world)
    that when assembled, take a form of what is known as the Sectoral Balances equation:

    (G – T) = (S – I) – (X – M)

    What is extremely important here for you to understand, is that the Sectoral Balances equation and what I am about to say to you is not subject to opinion. It is the reality of the national accounts.

    Government spending is the depositing of dollars into the economy and taxation is the withdrawal of dollars from the economy. If the New Zealand Government runs a budget deficit, depositing more dollars into the economy than it withdraws, then what remains is a net savings for the non-government sector. A way of looking at this concept is to consider deposits and withdrawals from your personal bank account. When you deposit and then withdraw money from your savings account, if the total amount deposited is greater than total withdrawals, then the remainder is a savings, or (D – W > 0), where deposits (D) minus withdrawals (W) are greater than zero. If less than zero, (D – W < 0) the result is a deficit.

    Similarly, the New Zealand Government makes deposits and withdrawals into/out of the New Zealand economy, except, in this case, the government is the income source for the entire New Zealand economy, as demonstrated by the reality that the New Zealand Government issues all dollars and by sectoral balances equation.

    [(S – I) – (X – M)], or the non-government sector, is 100% financially supported by (G – T) and, thus, entirely dependent upon (G – T) manufacturing dollars, and then giving it those new dollars.

    So, when we discuss budget deficits, what we are actually discussing is a stream of income (flows) into the New Zealand private sector that will result in New Zealand private sector savings (stocks). The New Zealand Government itself cannot have an actual deficit in terms of dollars, because it never has an income in dollars. It manufactures all of the dollars.

    When we discuss budget surpluses, what we are actually discussing is the withdrawal of dollars from the non-government sector that will result in New Zealand private sector deficit. The foreign sector (X – M) plays a crucial role here.

    Because international trade exists, the New Zealand both exports its own goods and imports foreign goods. When the New Zealand Government manufactures dollars and spends them, some of those dollars flow out of the New Zealand economy and into the rest of the world (X – M) through imports. Imports means that the New Zealand domestic private sector is buying foreign-made goods and paying for them with dollars, because the rest of the world is selling its goods to the New Zealand domestic private sector. If imports (M) exceed exports (X), then there exists what we call a “current account deficit” for New Zealand.

    So, if China has NZD1 billion, then the New Zealand domestic private sector has NZD1 billion worth of Chinese goods. Since NZD1 billion flowed into Chinese hands, that is exactly NZD1 billion that the New Zealand domestic private sector cannot spend in order to decrease unemployment. If there is a current account deficit, more dollars are flowing out into the hands of the rest of the world than are flowing back into the New Zealand domestic private sector, and so, the New Zealand Government simply cannot run a budget surplus without causing a recession in the New Zealand domestic private sector.

    As budget deficits are income for the New Zealand domestic private sector, then if there is a current account deficit in conjunction with a budget surplus, dollars are flowing out of the New Zealand domestic private sector in two directions:

    1.) into the rest of the world through imports
    2.) back to the New Zealand Government through taxation

    The result, then, is that the total amount of dollars circulating in the New Zealand domestic economy is shrinking and the New Zealand Government would be forcing the New Zealand domestic private sector to run a deficit in order to prop up the economy. What this means, is that the domestic private sector must rely on bank credit to continue spending, which will result in the increasing indebtedness of the domestic private sector. When the New Zealand domestic private sector can no longer take on more private debt, consumers will reduce their spending. When this occurs, businesses will begin losing income. As businesses lose income, they will lay off workers, unemployment will rise and a recession will occur. When the unemployed seek assistance from welfare and unemployment insurance because few jobs are available, the budget surplus will automatically become a budget deficit.

    In very simple terms, the reality is that the government’s deficit is not the New Zealand private sector’s deficit and a budget surplus is not the New Zealand private sector’s surplus. Since there exists a current account deficit, then at all times, to ensure persistent full employment and a stable economy, the New Zealand Government must run budget deficits targeted at full employment. Expanding budget deficits are necessary up to the point of full employment, which is the point of maximum production capability; a condition we call “macroeconomic efficiency”.

  11. CLEANGREEN says:

    Frank;

    I forgot to mention I have requested to teleconference the committee at MFAT who are reviewing the submissions on the TPP 11 at present so on Thursday 17th, i will be allowed 15 minutes to verbally place our submission before that committee from 10am to 10.15.

    We hope others have also taken the chance to go to those three public meetings over the TPP 11 can be in Auckland on 17th May to hear the final hearings on this terrible “trade agreement so hear is the nuts and bolts of our submission to MFAT today.

    Referenced material from;

    The Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP), also known as TPP11 is a signed, but not-yet ratified, trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. These countries represent 13.4 percent of the global gross domestic product or $13.5 trillion, making this the third largest trade agreement after the North American Free Trade Agreement and European Union.

    Our teleconference at 10am to 10.15am 17th May 2018 with the panel on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP), also known as TPP11”

    Our speech will be someting similarly as follows;

    Our concerns with the final draft of “The Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP), also known as TPP11”

    Pros: – Free trade is a good thing in the right situations.

    Any of you who’ve taken introductory level Macroeconomics will likely already know this.

    But trade between nations allow each country to specialise on producing what they have the comparative advantage in.

    By removing barriers to trade such as tariffs and quotas.

    The TPP agreement would allow global businesses to trade profitably in markets they are currently unable to do so in.

    For example, Japan has very high tariffs on pork products in order to protect their own pork industry.

    If TPP is used with Japan as a member, these tariffs would be done away with and U.S. companies could then compete in Japan on a level playing field.

    TPP installs new intellectual property laws in an attempt to protect the original rights holders.

    This is obviously a hotly debated topic, and there are costs and benefits on both sides of the issue.

    Cons: –

    TPP could possibly be very detrimental to the environment.

    Under the TPP Environmental chapter, corporations could sue governments should they enact environmental legislation that would hurt their business.

    Essentially, TPP asserts to the world that business’s profits are more important than the health of Earth.

    This partnership would allow companies to sue countries.

    Let that sink in for a moment; – instead of working in the best interest of their people, governments of member nations would be liable for damages and compensation if they passed legislation that hurt a foreign companies business.

    Environment, public health, zoning codes – all are potential vulnerabilities under TPP depending on the wording of the final draft.

    Intellectual property law would once again be strengthened.

    While some protections are a good thing and help to ensure creators are properly rewarded for their time and effort, if taken too far such legislation can prove detrimental to creativity and innovation.

    While the supporters of the TPP believe the provisions contained within are a good thing, the opposition to the TPP believes in the other side of the coin.

    Local business will be damaged;

    Our business is solely involved with monitoring the environment to protect the health and well being of the communities we represent in NZ and will under this TPP agreement be subject to legal threats upon our business instead of working in the best interest of their people, as we are continually working alongside our local and central NZ government to make our environment, and transport systems operate in a safer place to live and encourage our government to introduce new legislation to protect our environment and people.

    So Governments such as ours under TPP 11 will become a member with other nations would be liable for damages and compensation if they passed legislation that hurt a foreign companies business.

    Environmental NGO’s will be damaged;

    Under our NGO; a publicly funded Environmental Advocacy NGO we would also become legally threatened, instead of working in the best interest of their people, as these Governments in TPP 11 of member nations would be liable for damages and compensation if they passed legislation that hurt a foreign companies business.

    This will damage our environment and our public health under the current rules in this TPP 11 trade agreement.

    Our resolution;

    We request the NZ Government make changes before finally signing up to this restrictive trade agreement.
    • To protect all NZ legislation and environmental regulations.
    • Protect both current and future introduced new environmental legislation.
    • Allow free flowing of all environmental submissions and discussions between all NZ communities, environmental business interests, and their local & Central Government.
    • Protect the local & Central Government abilities to freely promote such environmental legislation to protect the environment and the communities they represent in NZ.
    • Protect all Government agencies such as ‘The parliamentary commissioner of the Environment’ (see attached “HB Expressway noise & air quality issues”, as one case still under advisory status) and all other similar such environmental agencies advising Government of environmental issues.

  12. Observer Tokoroa says:

    Hi Frank Macskasy

    Do Journalists writing, or interviewing on Government issues have to declare there personal interests on the Topic. Or are they permitted to just prattle on irrespective of bias ?

    Are they allowed to accept Gifts and Holidays, Perfume and the like, from lobbyists and interested parties?

    The reason I am asking, is I would like to send Perfume to Tracy Watkins for giving out half true back to front information.

    Also some Stuble Removal After Shave for John Armstrong of the wondrous Herald up in narcissistic gridlocked Auckland.

    I think nearly every Journo in NZ deserves rewards. For continuous disinformation. Nearly all.

    Soon I am hoping to bottle up the new “Anz Pigtail Vintage – Key Wine” for extra special rewards to the “Compulsively completely Dishonest”.