Spare Room Be our guest…

By Kirk MacGibbon

National’s handling of the cancelling of its flagship tax cut package is a masterful piece of media and public opinion manipulation that simply cannot be left to go unacknowledged. Well done, boys.

You’ll recall (maybe) that in the lead-up to the general election, Key and English were repeatedly asked whether their tax cut package was realistic given rapidly deteriorating global financial markets. Their answer then, and following the election, was that tax cuts were affordable and had been ‘fully funded’ and ‘fully costed’. They were still saying this, albeit not quite as loudly or often, up until February.

Fast forward to last month when Operation Cancel Tax Cuts at Insistence of Sensible New Zealand Public was launched, with no fanfare, on the back of an OECD Report noting we should be careful about our borrowing and perhaps consider flogging off a few assets like Air NZ and KiwiRail, among others. I recall some muttering by Bill English about ‘not in the first term’. I was waiting for someone to stand up — where was Sir Roger? — and perhaps let the OECD know that we had actually already sold those ones, cheaply as it turns out, to the private sector, who systematically enriched themselves, leaving the taxpayer to front up with the funds to rescue them later.

I couldn’t believe anyone was actually giving the report the time of day, but there was our Finance Minister with his freshly minted ‘Mr Fiscally Responsible’ face on, noting the testing times ahead.

Then, in a speech to our ‘captains of industry’ last week, English mentions $50 billion in ‘lost’ GDP over the next three years, which was quite bad. But worse, apparently, was that it couldn’t be taxed. I thought this little ruse was particularly clever. The$50 billion represented economic output that we would have had, if we hadn’t had the worst recession in living memory. In other words, we never had it but now we know we don’t have it, things have to change. It is bizarre logic, but when you’re searching for any reason not to deliver on a key election promise, anything will clearly do.

The third leg in the Government’s softening up policy was provided by the IMF in a report that said NZ needed to take ‘forceful action’. The Minister again gives us his new serious face and talks about the need to be, well, Fiscally Responsible.

What a bummer for Bill that after having waited so long to get back on to the Treasury benches, he’s being forced slowly but surely into a Cullen-esque kind of role in this Government that we all still remember from the last one. He will be only too aware that it’s way too soon for a sequel. Bill can’t possibly be scroogier and more prudent than Cullen. He’ll get no credit for any improvement without policies that signal a definitive break with what has gone on before. Bill needs to get a new act.

It seemed to me that with the OECD and IMF reports so clearly still representing and promoting Chicago School economics and the same old monetarist rubbish, Bill could have pointed to a need for new and different ways to skin cats. Instead he takes the ‘safe’ way and uses them as softening up exercises.

I don’t quite buy all the gloom around increasing borrowing and debt to GDP ratios. Okay, I’m not an economist and my own finances could best be described as ‘banana republic’, but if Cullen showed us anything over the past nine years it was that high debt levels are fine, provided you commit to paying them down during the good times. The critical part is being able to service any debt. The fact that future taxpayers will be helping to do this ensures some inter-generational equity. Those future taxpayers will be using the infrastructure built now. Cullen got our debt levels down to around 20 per cent of GDP from around 40 per cent when he took office. We’re forecast to reach 50 per cent or so in three years. There is no reason why debt levels couldn’t reach 50 or 60 per cent of GDP, except some banker-types are insisting on telling us that we musn’t.

Isn’t it just the situation we’re in now that Key could maybe make himself genuinely useful? He’s a banker. Don’t they have secret handshakes and stuff that speaks a thousand words with an upturned eyebrow? Why can’t he convince his banker mates in Standard & Poors that we’re good for it and will pay things back when the good times roll?

Jesus, most of us have mortgages equating to several times our annual salaries. Why is it a big deal when New Zealand Inc has debt levels equal to half her annual output? Why is this cause for concern? We deserve a better standard of debate about options than we’ve been given to date. And English needs to do a lot more than simply continue blaming the previous government for his problems. Its boring and what’s more it makes him look overwhelmed by it all.

English’s real problem is one of his own party’s making: In order to win the election they promised to retain virtually every single major Labour initiative. That deliberate policy has painted English into a bit of a corner when it comes to reviewing and reining in government spending. He just doesn’t have the wiggle room to enable him to reduce expenditure and so be able to afford the promised tax cuts.

Meanwhile the media seems to have decided to help out English et al, by commissioning research on the desirability of cancelling the tax cuts. Perhaps unsurprisingly, TV3 and TVNZ’s research helpfully showed that there is a significant majority — around 35 per cent — of people who believe the tax cuts should be cancelled. Given that a significant number of people would not have qualified for them, we weren’t informed as to whether those supporting their cancellation were ever going to receive them. It has always been my experience that people who are not entitled to some thing are generally not supportive of others getting that thing.

And on the subject of polls, why on Earth are the media running political polls at this stage of the election cycle anyway? They would have to be notoriously unrepresentative of any genuine feeling among voters. Who gives a toss about political parties at this early stage?

I would expect a massive level of support for the Government. We’ve only just elected them and with National’s extended honeymoon still in evidence, no-one will be seriously considering the issue. Imagine yourself being quizzed by a pollster — you are not really going to give the questions a lot of thought when an election is still 2.5 years away.

On a completely different subject, I have to applaud the selection of David Shearer for Helen Clark’s seat of Owairaka. He would appear to be an outstanding candidate — even if National, in concert with a compliant media, are reduced to dredging up comments he made in 1998 and 2001 on the use of private security firms in the world’s hotspots.

Personally, I could find nothing outrageous in the articles mentioned. What I did find outrageous was the media equating the use of private security firms with using Blackwater, an American outfit that has proved disturbingly trigger-happy in Iraq. And Key’s attempt to use Shearer’s articles to suggest he was in favour of privatising parts of the military was pathetic and typically, for him, simplistic.

I like David Shearer. I like the experience he would bring to Parliament and it seems to me that he would be an outstanding candidate for any party, National included. He has ‘future leader’ written all over him, which must be difficult for Goff, who is rapidly becoming a mere seat warmer for the ‘real’ leader to come. The by-election will be an interesting contest. Bring it on…

Read more posts by The Outlaw:
Independent Foreign Policy and Jetpacks
Of CEO Styles and Pedalling Wealth
Being Rankin’d and other tales from the Gulag Archipelago
Of History and Relevance
Humpty Dumpty and putting things back together again
Where’s Our Government?
Of Honeymoons and Little Men