The Dim-Post

May 23, 2012

A question from a non-economist

Filed under: economics — danylmc @ 6:37 am

So tomorrow’s budget is going to be another ‘zero budget’, because it’s incredibly important for the government’s accounts to return to surplus before the next election  to maintain fiscal credibility. And Labour agrees that getting back into surplus real fast is real important.The contention between the two main parties is which one of them is responsible for all the current debt.

But looking at the principle features of our economy, we currently have:

  • A lot of unemployed people and record levels of workers migrating to Australia.
  • Close to zero economic growth
  • A huge amount of infrastructure that needs building or upgrading (including an entire city)
  • The government can currently auction its bonds at historically low rates

Doesn’t that combination of factors make this a really good time to borrow a lot of money and invest it, instead of hurrying to pay down debt? Are there sound reasons why we aren’t at least talking about that as an option?

I know the right-wing talking points: that householders and the private sector never run their finances that way, which is why nobody in New Zealand has a mortgage and the corporate bond market doesn’t actually exist; that borrowing and investing is ‘what happened in Greece’. (That is not what happened in Greece.) And, viz Matthew Hooton on RNZ last week, that it is literally impossible for the government to create jobs – so if it borrowed $350 million dollars to build a convention center in Auckland, say, the universe itself would intervene to prevent an increase of jobs in the construction or tourism sectors.

But are there actual, serious reasons the government doesn’t take advantage of current conditions? Would a policy of borrowing and investing to grow productivity really make creditors and the bond market cry?

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53 Comments »

  1. Have we stopped borrowing hundreds of millions a week? When did that stop? Why were we not told ( when I say “we” I actually mean Danyl and I).

    Comment by Barnsley Bill — May 23, 2012 @ 7:19 am

  2. The bond markets can turn on a dime and while borrowing maybe cheap now when you roll over that debt in 5 years time you may be doing it 500 basis points higher with an aging population and fall off the fiscal cliff. This is exactly what has happened with Greece, artificially low rates by dint of euro membership now their two year debt trades at a yield of plus 20%.

    Comment by David — May 23, 2012 @ 7:42 am

  3. Have we stopped borrowing hundreds of millions a week? When did that stop?

    That’s money National is borrowing to avoid annoying potential National voters. To be fair, they’re only continuing voter bribery begun by Labour, but Labour wasn’t borrowing hundreds of mil a week to fund it. No, Danyl’s talking about the govt borrowing money to do something useful with it for a change rather than pissing it against the nearest wall.

    Matthew Hooton on RNZ last week, that it is literally impossible for the government to create jobs

    Well, have you ever heard of someone working in the public sector in this country? Does Not Happen.

    Comment by Psycho Milt — May 23, 2012 @ 7:53 am

  4. Perhaps the only reason that that the Government can borrow at historically low rates is primarily because we are attempting to get the deficit under control and pay back debt in the short(ish) term. Any attempt to borrow large amounts to invest would result in increasing interest rates.

    Comment by MarkS — May 23, 2012 @ 7:57 am

  5. Because what you’re suggesting is Keynesianism and that’s the same as socialism which is the same as totalitarianism. You can’t have a right wing government buying into Soviet-style policies.

    Comment by MeToo — May 23, 2012 @ 8:11 am

  6. What you are saying is valid – but when we view the budget in economics terms, instead of the political terms it is being sold in, there are a few things to keep in mind:

    1) The goal should be to have a balanced budget, once the economy is back at “potential”. So the surplus in 14/15 has to come with a forecast that has unemployment at or below 5%. If unemployment ends up higher than this, the government will continue to run a deficit by default – and so even when the forecasts are wrong this aim squares out.
    2) Government has been borrowing heavily, at low interest rates, to fund infrastructure. If it wasn’t for government building there would have been virtually no non-residential building in recent years. Infrastructure spending (in real terms) is at record highs. The government is actually being very Keynesian – they just don’t want to say it because their supporters might get grumpy.
    3) If the government keeps to the idea of getting the budget back in balance by the time the economy is back at potential, and makes that clear, it makes it easier for the RBNZ to cut the OCR or at least keep it at its current level, which will also help to boost activity/cut unemployment.

    You are right it is an incredible period of uncertainty – but the government can’t do too much about that directly except limit uncertainty from them by ensuring their plans are clear. We can debate what the appropriate long term “size” of government should be – but I think both parties are being responsible by making sure that we have the budget back in balance by the time the economy is back at potential.

    Comment by nolan83 — May 23, 2012 @ 8:14 am

  7. Are we not missing something. The majority of the debt appears to be private debt. Since when is the government responsible for private debt. I agree that we need overseas funds to repay that debt but that is another matter. Is the government borrowing so that private firms can pay back the debt that they created?
    maybe its time to revisit currency controls?

    Comment by Ron — May 23, 2012 @ 8:15 am

  8. as an also non economist, the thing with borrowing is that you have to pay it back or you get in lots of trouble. Debt doesn’t go away. But there is no guarantee that the money you borrowed is actually making more than the cost of borrowing, especially as govt tends to move quite slowly.

    The problem I have with those who prefer much higher debt than sale of state assets because they are concerned about national sovereignty, is they don’t acknowledge how much control you actually lose when you can’t pay your debts as to theoretically lose when you sell a power company. Greece is a very good case in point, but it is not the only one. How in control of their country are Greeks feeling these days?

    Comment by insider — May 23, 2012 @ 8:23 am

  9. “Are we not missing something. The majority of the debt appears to be private debt. Since when is the government responsible for private debt.”

    Since the government implicitly backs private individuals ;)

    “Maybe its time to revisit currency controls?”

    No. Not only is this a non-sequitur, but a free-floating currency is what helped this recession be a lot smaller in NZ than it has been overseas … while a set of fixed exchange rates is the primary reason why the crisis in Europe, and as a result the world, has been so violent.

    Comment by nolan83 — May 23, 2012 @ 8:24 am

  10. “I know the right-wing talking points: that householders and the private sector never run their finances that way”.

    There’s a problem with this though. Householders wouldn’t usually purposedly reduce their income streams when things got tough…

    Comment by max — May 23, 2012 @ 8:46 am

  11. I’m not sure I went so far as to say it is literally impossible for the government to create jobs. Whatever my actual words, my point was that in practice neither National nor Labour led governments think this is a good idea, whatever they say in opposition.

    The exceptions are things at the margins like the East Coast Forestry Project and the cycleway and perhaps the Convention Centre.

    These tend to create a few hundred jobs at most for huge cost. The cycleway, for example, has a budget (I think) of circa $50 million. How many jobs has it created?

    Whatever the number, the private sector has created at least 60,000 jobs since John Key was elected (his 60,000 figure is net and public sector jobs have been cut at least in Wellington), far more than his cycleway or whatever number people think might have been created by another government over that time.

    The state of global demand plus domestic macroeconomic settings and labour and other regulation are overwhelmingly more important than government “growth plans” “jobs machines” etc.

    These comments were all in response to a call from Josie Pagani for the government to use tax dollars to look for new enzymes in milk in order to transform 50kg bags of milk powder in high-value goods.

    Obviously, neither Fonterra, nor Tatua, nor Westland, nor Synlait, nor Open Country Cheese, nor Massey University, nor Lincoln University have ever thought to do this, never have, and only will if the government pays them to.

    I am particularly wary this week of people talking about “creating jobs”. Especially journalists, bureaucrats, political commentators and politicians (red, blue, green, yellow or whatever).

    Comment by Matthew Hooton — May 23, 2012 @ 9:09 am

  12. I heard that exchange, and what you said was that it is impossible for governments to create jobs, ever. And you got more and more hysterical as you went on, announcing that the firing of public servants in Wellington is a good thing, and more should get fired. Those people have families, Hooten. What the hell is wrong with you?

    Comment by Jake — May 23, 2012 @ 9:33 am

  13. Also, at least two of those institutions you mention are government-funded, and could do with an increase. Try and guess which!

    Comment by Jake — May 23, 2012 @ 9:37 am

  14. I think Nolan is right. The govt’s investment in motorways (a form of infrastructure) in this term has really been huge – like unprecedented if you look at our historical rates of transport spending. It is so high that (arguably) we are actually going to have to borrow outside of the fuel tax to pay for it – and the fuel tax is now fully hypothecated, which it was not under Labour. The problem is that the particular motorways the govt is building (with some honorable exceptions like the Kopu Bridge) aren’t a great form of stimulus infrastructure investment. Not only do they not create many jobs per dollar spent (compared to something labour intensive like building state houses or riparian planting) but many also won’t be particularly useful to us in the long term.

    Comment by Amy — May 23, 2012 @ 9:37 am

  15. As long as we have a positive OCR the government literally cannot create jobs, because anything expansionary by the Government will be offset by contractionary policy by the RBNZ. This isn’t a right-wing talking point, e.g. Krugman has been saying it for years. Key said this in an interview recently and it’s standard modern Keynesianism.
    That doesn’t mean we shouldn’t invest in infrastructure though.

    Comment by TC — May 23, 2012 @ 9:40 am

  16. The problem is that the particular motorways the govt is building (with some honorable exceptions like the Kopu Bridge) aren’t a great form of stimulus infrastructure investment.

    Roading infrastructure is important for the rural economy – and hence to all of us. Not even the Green Party can magic organic free-range eggs from the farm gate to the urban frypan. And more generally all that milk gets transported on roads and the more efficient that is the more export dollars we earn.

    The extension to Auckland’s motorway is welcomed by people living in the area because it will benefit the local economy as well as increase road safety.

    Comment by NeilM — May 23, 2012 @ 9:57 am

  17. The government is actually being very Keynesian – they just don’t want to say it because their supporters might get grumpy.

    I’m continually surprised at how this gets overlooked. National has continued to borrow in order to stimulate the economy. They have sort to keep govt spending down but it’s hardly been an austerity govt.

    Comment by NeilM — May 23, 2012 @ 10:00 am

  18. In answer to your question, grab some of this cheap money (and it is historically very cheap) and go out and create some jobs or better still buy a bigger house
    And pray that when it is rolled over the interest does not eat you up
    Or ask Colin Meads and quite a few other who borrowed offshore in the late 80s? at cheap interest rates what happened next

    The thing is unless you can use the money to create real wealth and jobs you are on a hiding to nothing and mostly Governments don’t have a very good record (since 1950) of doing this
    The first Labour government did manage this but apart from the catchup from the slump I wonder if it was not WW11 that saved their bacon

    Comment by Raymond Francis — May 23, 2012 @ 10:10 am

  19. Governments can’t create jobs?

    How about, after the February 22 earthquake in Christchurch last year, the govt funded polytechnics to employ more staff to develop and deliver more pre-apprenticeship training programmes in the construction sector. And then funded the students (esp. those with family ties in Canterbury) to do those courses. And then employed them on the re-build, possibly with a subsidy for employers willing to take on apprentices. You know, invest in our young people and give them productive jobs, instead of keeping them on the dole and importing tradespeople to do the work.

    Comment by MeToo — May 23, 2012 @ 10:24 am

  20. “…As long as we have a positive OCR the government literally cannot create jobs, because anything expansionary by the Government will be offset by contractionary policy by the RBNZ…”

    This is a great point – The Chicago gangsters have so structurally hobbled Keynes that no one is capable of actually implementing Keynesian economics anymore. You would have to repeal the reserve bank act, the fiscal responsibility act and whatever mad TABOR scheme the fruitloops in ACT manage to get in place first. clearly signalling to global capital their need to ensure you government is destroyed.

    “…I wonder if it was not WW11 that saved their bacon…”

    Well, I suppose WWII was the ultimate Keynesian stimulation, with the added bonus of enough capital destruction to keep inflation under control for fifty years. However, I suspect today such a policy would simply lead to a global nuclear holocaust which wouldn’t so much feed a Keynesian recovery as help fufill the Randian survivalist fantasies of all the mini-Gaults out there. I suppose we could declare war on Australia and have our invading legions wage a sufficiently ruthless scorched earth policy to ensure the inevitable heavy defeat at the hands of a global alliance comes with enough vengeful retribution to ensure the post war economy can really bounce along for a few decades but I am not sure the electorate (dim witted scum that they are) would be at all keen on it.

    Comment by Sanctuary — May 23, 2012 @ 10:35 am

  21. I wrote this last year but it is still relevant, National has a cunning plan! Their policy of austerity and underinvestment is actually a form of stimulus and their strategy of cutting funding “to improve front line services” is far more logical than people realize:

    http://localbodies-bsprout.blogspot.co.nz/2011/07/nationals-cunning-plan.html

    Comment by Dave Kennedy — May 23, 2012 @ 11:03 am

  22. Standard and Poors has said they’re not worried about the government’s debt, it’s low growth and the country’s overseas debt that they’re concerned about. They said they wouldn’t bat an eyelid if the return to surplus was delayed by a year.

    So, yeah, a bit more debt, a few billion or so, doesn’t matter.

    After all, National’s going to have clocked up $70 billion of borrowing by 2014, what’s a fraction more?

    Comment by Deano — May 23, 2012 @ 11:10 am

  23. I read David Parkes “Don’t Blame the Greeks” speech.

    I think we might be in trouble if Labour really believes our economic woes aren’t to do with the international financial crisis and talking Australia’s sucess with no mention that that’s based on their mineral exploitation is a bit of a worry as well.

    From what he’s said I gather that Labour’s primary policy for an export-lead recovery is to oversee a currency devaluation.

    Comment by NeilM — May 23, 2012 @ 11:39 am

  24. NeilM – don’t blame the Greeks is the topic of this post by Rob Salmond

    http://pundit.co.nz/content/gdp-growth-further-nonsense-from-government-ministers

    Sure there’s been a global financial crisis and many countries went into recession for a time, and some are back in it, but that doesn’t explain why our GDP growth is less than many of those other countries …

    Comment by MeToo — May 23, 2012 @ 11:53 am

  25. Much of the dairy industry research on value-added products has come from government funded co-operative programmes – which all take serious time and money. Fonterra was keen to acquire Dairy Research Institute presumably on the basis of accessible useful research. I suspect, Fonterra are still participating in the MSI funding rounds for research.

    As always, funding research is like giving money to spendthrift drunks, the chances of return + interest are remote, but when it does happen the bonanza may justify the investment. NZ spends $2 billion/year on R&D, most of which was originally from taxpayers.

    Other than researchers, not many new jobs have eventuated, and we still have quarterly announcements of new discoveries ( cure for cancer, new medical and industrial products, new biofuels, etc etc. ) .

    Comment by Bruce Hamilton — May 23, 2012 @ 12:30 pm

  26. Sure there’s been a global financial crisis and many countries went into recession for a time, and some are back in it, but that doesn’t explain why our GDP growth is less than many of those other countries …

    I agree with Parker that the NZ economy has major long-standing structural problems but the rainy day that Cullen was always warning against did come about, there’s no sense in denying that. Whatever we do to improve our exports isn’t going to stop the collapse of markets and of the European and US financial systems.

    There seems to be general agreement that our dollar is over-valued and that the best thing that could be done for exporters is for the value to fall. I take though that for a Govt to engineer that it’s no quite so straight forward.

    Comment by NeilM — May 23, 2012 @ 12:41 pm

  27. “Duplicate comment detected; it looks as though you’ve already said that!”
    Yeah, well; show the blasted comment, goddamn you. Blinking wordpress.

    Comment by Clunking Fist — May 23, 2012 @ 1:22 pm

  28. MeToo @ 19
    “the govt funded polytechnics to employ more staff to develop and deliver more pre-apprenticeship training programmes in the construction sector”
    So how many more staff were employed in the polytechs? And at what cost?
    Remember, every public servant’s Net pay comes out of the pockets of private sector taxpayers (unless the pub serv is employed in a “user pays” environment, which is not many). So in order to “create” these jobs, taxpayers have to find extra money to pay those tutors. See http://dimpost.wordpress.com/2011/04/30/an-infinite-amount-more-where-that-came-from/
    Hopefully, all those “pre-apprentices” go on to find jobs in the private sector. I don’t believe you can argue that govt “created” the building jobs that these pre-apprentices will fill. At most, the earthquake (i.e the spaghetti monster farting) “created” these jobs.

    Comment by Clunking Fist — May 23, 2012 @ 1:24 pm

  29. MeToo @ 23 says “NeilM – don’t blame the Greeks is the topic of this post by Rob Salmond”
    A post in which Mr Slamond points out that the US has had higher growth rates than us since National came to office. He fails to point out that the US started from a “lower base”, in that they tanked worse than us so had further to go to get to the pre-GFC point. He also fails to point out how bad their unemployment is after all this apparent growth, and how much money they have thrown at the problem. If it wasn’t for the fact that the US dollar holds some special sway over people’s minds, and their economy so big, I feel that their bonds would have been downgraded to junk status long before now. I love how before 2008, GDP was derided by lefties as some poor measure of economic wellbeing and that we should explore other ways of living rather than simply trying to grow GDP. But now they all bleat because GDP growth is not high enough, failing to recognise that borrowing money and spraying it around WILL boost that GDP number, but won’t boost our economic well being when the time comes to pay the money back.

    Comment by Hairy Bon Bon CF — May 23, 2012 @ 1:34 pm

  30. @29 the point is that National is saying ‘hey look at the GPD figures, aren’t we awesome’, and the response is that looking at the GPD figures suggests they aren’t very awesome at all.

    Comment by BeShakey — May 23, 2012 @ 1:55 pm

  31. CF @28 = none. It was a hypothetical. What the govt could have done, had they had the vision-thing. Spend money to train people to match the jobs that actually exist but aren’t being filled by NZers because the skills match is wrong. Longer term the pay-off for the economy may well exceed the upfront costs (i.e. it’s an investment not an expense) – the money these workers earn, they then spend, the multiplier effect takes over and you get growth. Not to mention paying less out in welfare and having happier citizens who can see a future in their own country.

    (yadayada nirvana)

    Comment by Me Too — May 23, 2012 @ 2:00 pm

  32. It is interesting how much comment is based on economics which many find is not a real discipline at all. Some refer to economics as a social science but even that is giving it more weight than it is due. In fact one wonders if universities should even be in the business of teaching such a subject. But then they teach Theology which is not a real subject either. It seems that neither theology or economics have any sort of scientific method by which one could prove or disprove the veracity of the stuff taught. We are left with a bundle of personal theories and end up with whole instutions following one man’s theory (Chicago School of Economics or Cambridge) for instance
    Whilst looking up the subject I stumbled upon Feminist Economics Journal http://www.feministeconomics.org which certainly has a more to offer than many of the theories being quoted above probably because they start with a different raison d’etre “to improve the conditions of living for all children, women, and men”

    Comment by Ron — May 23, 2012 @ 2:11 pm

  33. A post in which Mr Slamond points out that the US has had higher growth rates…

    I have a similar problem with Parker comparing us to Australia, pointing out how well they’re doing in comparision without any mention of what Australia’s wealth is based on. That’s just cherry picking evidence.

    I was mildly in favour of a GCT but not so sure now. The tax base should be broadened but I’m not sure that a GCT will really transfer all that much money out of housing and into “productive” investment. There already is a tax on property investment and a GCT is not going to stop people paying ridculous amounts to live in Grey Lynn.

    Hollande will be introducing a financial transaction tax, it will be interesting to see how that goes.

    Comment by NeilM — May 23, 2012 @ 3:15 pm

  34. Theology which is not a real subject either

    Hmmmm… a few billion people would probably disagree.

    Comment by T-Malrdzzz — May 23, 2012 @ 3:35 pm

  35. So economics is stupid but feminist economics is great?

    The whole ‘catching up with Australia’ thing started with National, so hard to complain when they get hoist with their own pitard. I assume you mean a CGT, which isn’t a magic bullet, but should be assessed rather as to whether it is an overall improvement to our tax system and fits with a broadening of the base. Lastly, Tobin taxs only really work when they are introduced internationally and (sadly) there doesn’t seem to be much inclination towards that. Hollande’s election might move one significant country in that direction but there are others (eg the UK) who are vehmently opposed.

    Comment by BeShakey — May 23, 2012 @ 3:41 pm

  36. Danyl, you asked about borrowing and investing to grow productivity. You could start by trying to list these kinds of investments that would improve productivity – that is, ones that would pay their own way, as opposed to things that look nice, create some temporary jobs, and shunt the cost onto future taxpayers – and that the private sector, for whatever reason, is failing to identify. “Why doesn’t the gummit do somefink?” is not a real question.

    Comment by Miguel Sanchez — May 23, 2012 @ 3:52 pm

  37. You’re begging the question here, Danyl. Whether or not Hooton did actually argue it was literally impossible for the government to create jobs, even if he’s wrong and job creation is a possibility, it doesn’t follow that the government should definitely borrow money in order to do so. Stuff like the convention centre is not a great example – it will proveably create a good number of jobs while it’s being built, and a smallish number when it’s finished and running. The real question is, will the knock-on benefits create more economic growth/jobs, enough to justify the significant investment required? Which is a much more complex question than “Will it create a number of jobs greater than none?”

    Comment by Hugh — May 23, 2012 @ 4:05 pm

  38. The argument that the government hasn’t done enough in terms of stimulus is basically that the drop in unemployment has been from 7% at its peak a bit over two years ago to 6.7% now. Draw a straight line and you’ll conclude we’ll get unemployment back down to 5% around 2024. Now, even I’m more optimistic than that, mainly because Mother Earth might just have decided to give the good people of Christchurch a break, allowing the rebuild to proceed in earnest. My main worry is what the Reserve Bank will do after Bollard walks. Remember that the RBNZ is only obligated to care about inflation, and not growth or employment (which seems monumentally stupid to me, but maybe I lack the insight of the geniuses in the Fourth Labour Government). If a hard-liner like Don Brash takes over, he might hike rates and kill off the recovery at the slightest hint of inflation. In fact, you could argue that’s what the more moderate Bollard did in 2010, though the earthquakes cloud the counterfactuals. The uncertainty as to how the RBNZ will act complicates the case for fiscal stimulus. That said, if I were the government and worried about this, I’d be preparing a nice, loose Policy Target Agreement for the incoming governor.

    Comment by bradluen — May 23, 2012 @ 4:43 pm

  39. @ NeilM. It is certainly true that rural transport is important to our economy. As I said, the Kopu Bridge upgrade had a strong business case mainly because it will make it a lot easier to take freight (mainly produce) in and out of Coromandel. But three things – first, many of the Roads of National Significance the government are building are either in our cities or mainly designed to serve traffic going into our cities – for example, the Western Ring Route or Transmission Gulley. That’s one of the reasons they’re so expensive – because land in cities costs a lot. Second, a lot of the other roads of National Signifiance (such as Puhoi to Wellsford) are just massive, massive overkill. We are putting 4 lane highways into places where we really don’t need them because we only have 10,000 vehicle movements per day. That is why they have such crappy business cases – because, in fact, there is not very heavy traffic along these roads and they are not needed now and will only really be needed in another 20 years, IF (and it’s a big if) petrol prices stay low and traffic volumes start rising again (they stopped in 2007). Third, most of the research suggests that petrol prices are likely to rise over the next 50 years. So wouldn’t it actually be BETTER for the rural economy if our govt was looking to find more fuel efficient ways to transport goods around the country, e.g., by rail rather than relying on a mode of transport that is very fuel intensive. And before you tell me this cannot be done – bear in mind that in recent years Fonterra has actually mainly managed to get more and more of their dairy produce moving be rail :)

    Comment by Amy — May 23, 2012 @ 5:11 pm

  40. Ron @31 “It seems that… economics [has] any sort of scientific method by which one could prove or disprove the veracity of the stuff taught.”
    As economics goes straight to the heart of politics (as does climate science) you will see that opponents accuse each other of ignoring the proof because it doesn’t suit their political belief. Libertarians point to studies that indicate the multiplier effect of marginal govt expenditure is less than 1 (i.e. it destroys economic activity) Socialists point studies that prove the Great Depression was fixed by the New Deal.

    BeShakey @ 34.”So economics is stupid but feminist economics is great?” Good call! But where is your “proof” that Tobin taxes will create jobs (or whatever it is that its fans claim)?
    I take your point at 30 (twas I at 29), but the reality is we all know life cannot be measured with one KPI. It is a bit like those who fret about the unemployment rate being up, without also thinking about the fact that the number of people in jobs is also up, without also thinking about the numbers that have left for Australia, etc.

    Comment by Clunking Fist — May 23, 2012 @ 5:52 pm

  41. I assume you mean a CGT, which isn’t a magic bullet, but should be assessed rather as to whether it is an overall improvement to our tax system and fits with a broadening of the base. Lastly, Tobin taxs only really work when they are introduced internationally and (sadly) there doesn’t seem to be much inclination towards that. Hollande’s election might move one significant country in that direction but there are others (eg the UK) who are vehmently opposed.

    yes CGT. True it should be assessed as part of broading the tax base but it’s being sold as a cure for over-investment in houseing and under-investment in other areas. I’m not sure of all the details of a FTT but I would like to see it put up against a CGT for comparison. Labour may not have considered other options and went for a CGT just to get a point of difference, as they did with the ill-conceived no GST on fruit and veges, without looking at other options.

    It could be that by next election we get an idea of how things have gone in France.

    Comment by NeilM — May 23, 2012 @ 5:54 pm

  42. ps I suspect the wikipedia entry on tobin and spahn tax is writing by a libertarian: it is made to sound so kooky.

    Comment by Clunking Fist — May 23, 2012 @ 5:54 pm

  43. @Amy, you’re right, rail is more efficeint for some purposes. But freight still has to be transported to the stations since a train network can’t be all that distributed. I suppose it’s about balancing the development of both networks and there’s always going to be different views on priorties.

    Comment by NeilM — May 23, 2012 @ 6:42 pm

  44. “Theology which is not a real subject either

    Hmmmm… a few billion people would probably disagree.

    Comment by T-Malrdzzz — May 23, 2012 @ 3:35 pm”

    A few billion deluded people methinks.

    Comment by Quentin Rolloson III — May 23, 2012 @ 7:25 pm

  45. @ Ron,Sorry buddy , but your notion of public vs private debt is romantic ,perhaps fantastic . After a lifetimes work in developing an optimal alternative to substandard childcare ,and creating a financially and socially successful model , that was taken on board by the previous [ Lab ] govt as a viable way of getting recognised ECE to populations where alternative service was nonexistent ,but in turn , which required advance funding to set up an infrastructure of staff ,information , service ,accountability , and anciliary resources etc [ all to satisfy the Ministry's expectations ] all as an application on behalf of the “20 free hours ” initiative . Our service met these demands [as determined by the Review and Audit offices ] to the highest standard . , Ann Tolley, as the New minister of Education , chose to renege on the ministry’s commitments , on the claim that ; all advanced money to any service constituted a debt upon that service to the Crown for the money advanced , thereby 1 exempting the govt from any committment under the notion of ‘savings ‘ 2 any committment to provide Early Chilhood Education in areas that it previously did not exist , 3 Transfering any concept of a Govt Debt ,created in order to provide a service deemed appropriate [ECE ] via a nominated chartered and / or licenced provider , onto the shoulders of that provider , without warning or notice , nor opportunity to negotiate conditions of amelioration ,let alone any Substantial fact of responsibility for any alleged debt .
    Ron , the net result is ; Govt debt reduced by ….?…. { who knows , 3 years later they still cant quantify the numbers !!!!!!???!!! }
    An exemplary provider of service is terminated , to satisfy a rhetorical expectation / ideological nonsense
    After a lifetime of committment to providing the best possible service successfully in a highly competative { dare one suggest ; FREE MARKET environment } our personal circumstances are reduced to nothing . Our investment for retirement is gone .
    We now look forward to being totally dependent on the state in our declining years , and how smart is that Ron ?

    Jim.

    Comment by Jim Crawford — May 23, 2012 @ 10:19 pm

  46. A few billion deluded people methinks.

    Ha! Dare you to say that when the cold dead invisible hand of Milton Friedman smites thee…

    Comment by Gregor W — May 23, 2012 @ 11:45 pm

  47. I heard that exchange, and what you said was that it is impossible for governments to create jobs, ever. And you got more and more hysterical as you went on…

    Indeed, he does that often, the hysterical tantrum. Ask Winston Peters. I often wonder why RNZ perseveres with him, but, at times, when he remains composed, he can make some good points.

    But he is weird in his climate change denial fantasyland, but, because of his occupation, all it would take is a check for his usual hourly rate to change his tune on that.

    Comment by Luc Hansen — May 24, 2012 @ 12:43 am

  48. ‘But he is weird in his climate change denial fantasyland”
    How strange that a left winger like Luc lives in a climate change fantasyland. I mean, what are the odds!

    Comment by Clunking Fist — May 24, 2012 @ 1:26 pm

  49. I refer to previous comment about public versus private debt.
    According to latest figures I can find NZ has a public debt of 48 Billion and Private Debt around 220 billion.
    I cannot see why the Government needs to take any heed at all of the private debt. If the borrowers of Private Debt fail then the lenders over seas are out of luck.
    Obviously a different story with Public debt which the crown underwrites. Can anyone tell me why NZ should be underwriting private debt?
    Of course if you want to make a case for the sale of publicly owned assets it helps if you can exaggerate the debt by referring to total debt. 250 Billion sounds so much worse than 48 Billion

    Comment by Ron — May 24, 2012 @ 2:00 pm

  50. “Can anyone tell me why NZ should be underwriting private debt?”
    No one can, that’s why it shouldn’t be done. But the sooner the govt returns to surplus, the sooner they can cut taxes so that citizens can increase their debt repayments.

    Comment by Clunking Fist — May 24, 2012 @ 2:14 pm

  51. @Clunking Fist ??? Why would the government returning to surplus have any effect on private debt. It would still be 220 billion and properly higher as private borrowers would increase their indebtedness.
    Maybe the Government should be looking to discourage private debt especially when a lot of it is used to carry out activities that are positively injurious to New Zealand

    Comment by Ron — May 24, 2012 @ 3:24 pm

  52. Ron, becuase a percentage of tax cuts are saved by all but the poorest. I blieve there is empirical evidence to supprt this, but stand to be corrc3eted

    Comment by Clunking Fist — May 24, 2012 @ 4:54 pm

  53. “We are left with a bundle of personal theories and end up with whole instutions following one man’s theory (Chicago School of Economics or Cambridge) for instance”

    @ Ron – tell that to all those crazy followers of Einstein’s theory of relativity. Or should we abolish physics?

    A FTT (eg Tobin tax) is to boost govt tax revenue, not to boost GDP or cut unemployment. Similarly, CGT is to curb rampant house price inflation, not directly raise growth or jobs.

    No-one seems to be addressing the elephant in the room – that as long as we have free market capitalism, any NZ manufacturing gets undercut by foreign sweatshops. But it would be cheap for a NZ govt to impose tariffs based on workers rights, human rights, and enviornmental protections of each foreign country. And that would create a strong domestic manufacturing base.

    By contrast, govt borrowing money to create jobs and stimulate growth can work, but only if the money is wisely spent, not frittered away like the Greek govt did (because they didn’t want to crack down on businesses who didn’t pay tax).

    Comment by bob — May 25, 2012 @ 9:39 pm


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