Friday 15 December 2017

Grant Robertson’s “Mini-Budget” Presents Progressives With A “Maxi-Problem”.

 Same As The Old Boss? Robertson’s fetish for paying down Crown debt and amassing government surpluses will limit this government’s options to doling out some extra cash to beneficiaries and the working poor; increasing public servants’ pay; and making a handful of modest improvements to the nation’s infrastructure.

IT’S OFFICIAL – there is now no prospect of this government living up to its promises of introducing “transformational” change. Thanks to Grant Robertson, the Labour-NZ First-Green Government will, with one exception, be fundamentally indistinguishable from the Clark-Cullen ministry of 1999-2008.

The exception? After its initial “Free Tertiary Education” and “Families Package” spending splurges, the Ardern-Robertson ministry intends to keep new spending at levels well below those of both Clark-Cullen and Key-English. Robertson’s fetish for paying down Crown debt and amassing government surpluses will limit this government’s options to doling out some extra cash to beneficiaries and the working poor; increasing public servants’ pay; and making a handful of modest improvements to the nation’s infrastructure.

Now, don’t get me wrong, all of these things are “nice to have”, but we must be very clear about the sort of economic policy Robertson’s “Mini-Budget” is locking-in. Essentially, what we have is a new government offering to be – at best – a slightly more generous version of the government it replaced. At worst, we may be looking at an initial burst of generosity followed by years of the most flinty-faced parsimony. Very much a case of “meet the new boss, same as the old boss”.

Conservative politicians and commentators are forever telling us that problems cannot be solved simply by “throwing money at them”. This simply is not true.

If a business is failing to grow; if it’s employees are being lured away by promises of higher wages; if the technology in use is out-of-date and prone to breaking down: what does the business owner do? If he’s smart, he borrows additional capital and ploughs it into the business. With the additional funds he buys new technology which, in turn, allows him to employ fewer staff at higher wages. The resulting uplift in the business’s productivity generates higher profits, out of which he repays the borrowed capital sum.

Throwing money at problems works a treat. If it didn’t, Capitalism would never have gotten off the ground.

Unfortunately, Robertson does not appear to grasp the critical fact that if New Zealand is to be “transformed” then he, as Finance Minister, is going to have to lay his hands on a very large sum of money. But, not only is Robertson averse to increasing the level of Crown Debt (even though it has never been cheaper for governments to borrow money) but he is also absolutely determined not to use the most important tool which governments – and only governments – possess: the ability to raise “capital” by levying taxes.

Raising taxes is important not only because it would allow the government to accumulate the financial resources necessary to do more than deliver a one-off lift in the incomes of the poorest New Zealanders, but also because a significant increase in the taxes of the wealthiest New Zealanders would begin to undo the transformation that the neoliberal policies of the past 30 years have already accomplished.

The transformation I’m talking about is the transformation which brought an end to the humane and generous social-democratic society for which New Zealand was renowned internationally, and which, in its place, erected the brutally competitive and grossly unequal society the vast majority of New Zealanders are required to live in today. If that society is to be transformed into something more decent and caring, then a substantial redistribution of wealth and power will have to be accomplished.

That could have been the brief of the much-ballyhooed “Tax Working Group”. (On the subject of which I penned a small political fantasy for The Daily Blog back in September.)  But, once again, Robertson erred on the side of caution – not transformation. The Tax Working Group, chaired by Robertson’s mentor and political patron, Sir Michael Cullen, has been given a ridiculously narrow brief, whose less-than-transformational outcomes will not come into effect until after the 2020 General Election.

By when, of course, it will be much too late to rescue this government from its all-too-evident parsimony and political gutlessness. Robertson’s tight rein on spending can hardly fail to set the coalition partners at each other’s throats. And as for that “Hallelujah Song” of emancipation and transformation, which Jacinda Ardern somehow convinced Winston Peters of Labour’s willingness to sing. Her ruthless finance minister will, long since, have truncated its stirring verses to a few discordant bars.

There will be some who take umbrage at my uncompromising pessimism. To them I say: “It is only because I have been here before.” I remember another inspirational Labour leader who put an end to nine long years of National Party rule by promising to take New Zealand “up where we belong”, and who then allowed his Finance Minister to wreak havoc on the expectations and aspirations of his party’s electoral base.

David Lange’s was a “transformational government” and no mistake. As transformational in its way as the First Labour Government. Except that, the transformation Labour wrought was not the transformation the people who’d voted for it were expecting.

“Rogernomics” was able to destroy New Zealanders’ humane and generous society because the political resistance to it was too little, and came too late. If the members and supporters of this government similarly fail to act immediately and decisively against the give now/withhold later policies of Finance Minister Robertson, then the best chance New Zealanders have had in 30 years to heal the harms of the neoliberal “revolution” will be lost.

Not that you’ll hear the National Party and their friends complaining. The low debt and large surpluses bequeathed to them by Grant Robertson will be more than enough to fund yet another round of generous tax cuts – for the rich.

The right-wing transformation of New Zealand will continue apace.

This essay was originally posted on The Daily Blog of Friday, 15 December 2017.


pat said...

Well looks like my hopes Robertson/Cullen may have looked ahead further than 2020 have been you note substantial investment is required and that demand is only going to be compounded by the urgent transition to a carbon neutral economy....or will this generations nuclear free moment (and Id suggest thats an undersell) be provided lip service only and James Shaw hung out to dry?

Once again politics trumps wonder politicians are viewed with contempt

Mark Hubbard said...

Actually, Chris, we have been in the Left-wing transformation of society since Lange's tea break. It's been all bigger and bigger command state, since. Slightly slower growth under National, but every National budget was a bigger state spend than Cullen's last budget.

Guerilla Surgeon said...

Nice to know somebody else realises that throwing money at problems often solves them. People look at me in horror when I say this. Sometimes there are ways of doing stuff that doesn't involve throwing money at the problem, but National doesn't do this either. Interesting interview on national radio this morning about Iceland pretty much solving its underage binge drinking problem. They did this partly by throwing money at it, and saved money in the long run. I've come to the conclusion that most politicians don't think there is a long run – at least not for them. Thinking from election to election and bugger everything else.

Kat said...

"new boss, same as the old boss"'s all perception. I would say different smoke, different mirrors, different outcome.

Polly. said...

Chris, well said;
the winnie influence on Labour is telling.
NZ needs the 33 page agreement between Labour / winnie.
The pox on both parties for their secrecy.

Jens Meder said...

Libertarian Rogernomics did not achieve prosperity for all because they opposed systematic (compulsory) participation in wealth ownership creation by all.

This was eventually rectified by the Clark/Cullen govt., and if Grant Robertson improves on that by continuing NZ Super Fund contributions and e.g. by re-introducing the $1000.- Kiwi Saver kick-starts unconditionally to all who have not received them yet "from cradle to grave" -

and still keeps up the austerity of achieving budget surpluses for public debt reduction and financing jobs and wealth creative useful and profitable investments - he and Jacinda's govt. will go down in history as the greatest in NZ history which amended the excessively Left and Right veering policies of the past -

and the increasing profitable productivity may even deliver enough taxation revenue to make freely consumable tax reductions affordable without giving up on the increased wealth creative collective (retirement) savings rate.

Dreamers of the welfare state of 60 years ago please note, that both New Labour and the Alliance were not politically very successful, as those policies of 60 years ago led to the need of (fiscal responsibility?) changes introduced in 1984.

Anonymous said...

I've always wanted it defined - at what level of income does one become among the wealthiest?

Anonymous said...

"If the members and supporters of this government similarly fail to act immediately and decisively against the give now/withhold later policies of Finance Minister Robertson, then the best chance New Zealanders have had in 30 years to heal the harms of the neoliberal “revolution” will be lost."

How? How do we do that? I chair an LEC. We learned about the Budget Responsibility Rules the same time as the general public.

Guerilla Surgeon said...

FFS Jens, of COURSE libertarians opposed compulsory wealth ownership. They're against compulsion in anything pretty much. Christ, there are those who claim they shouldn't be forced to feed their children. That's why it's an immature/juvenile philosophy which you really should outgrow sometime in your teens – about six months after you've read the Fountainhead or whatever. It's the idea that "I want to profit from the group/cooperative effort, but the hell am I going to pay anything towards that group cooperative effort."
And do I have to say it yet again, posterity doesn't work, we know austerity doesn't work, we've known it doesn't work for some time, and now even the World Bank claims that austerity doesn't work. So do you think you could perhaps do a bit of research and stop with the "need for austerity"?

greywarbler said...

Perhaps following in Sir Michael Cullen's footsteps closely, will lead to Sir Grant Robertson, and so be part of the aspirational Labour families rising in the social register and financial ladder. For change we need some John A lees, Borstal old boys who can stand some bovver. The present crop are probably too busy being the good boys at the top of the class or trying.

Doing the right thing in a daunting situation and being recognised and rewarded for it wholeheartedly is surprisingly, not the assured outcome one would expect.

I am fascinated how Lord Dowding who brought Britain to a ready state for aircraft, found how to utilise radar effectively, and knew how to most effectively apply resources human and machinery etc., determined to do the best for Britain and won the air battle some now call the Battle For Britain. He was determined to control the short-term and long-term battle readiness and defences. He stuck to that while others with enchanting theories won over the minds of the defence leaders.

At the end of the fierce few months, Dowding was about to be dropped by the upper crust with the minimum of ceremony based on the fact that he had been overdue to retire anyway. He had been passed over for the top Air ministry position and was given an ordinary place in the peerage. He was hustled out of his house on short notice. Churchill ensured that there was a semblance of respect for his wide knowledge and continued his career with special tasks, no doubt realising that there would be resentment if the
Lords were not prevented in their curmudgeonly ways.

Someone who can ride above that sort of dumbing down and derring-do is necessary (which was the problem for Dowding as there was a boys-own heroic enthusiasm set against his cool technological planning approach.) When the establishment are irritated with you and you don't fit, it doesn't matter how much needed are the tactics and the mastery of the subject, it's the old boy network that is put first and foremost.

Wayne Mapp said...

This tenor of this whole article sets out precisely the basis of Steven Joyce's $11 billion deficit.

Steven simply did not think it was credible that a Labour led government would run a tigher budget than National. Basically he considered in 2019 and 2020 Labour would spend an extra $3.5 billion. Because the the $3.5 billion from 2019 is baselined, there are three lots of $3.5 billion, one from 2019 and two from 2020.

Of course the $3.5 billion is Steven's estimate. It could be less, but it also could be more.

But it absolutely certain (in my view) that public sector pay is going to have bigger increases than under National, and there is likely to be more public servants employed.

If anyone thinks that Labour will be fiscally tighter than National, well all of history is against you.

Guerilla Surgeon said...

"Of course the $3.5 billion is Steven's estimate. It could be less, but it also could be more."

I'm not sure what information he was privy to that the various economists who said his idea was rubbish weren't. Perhaps you could enlighten us Wayne?

"public sector pay is going to have bigger increases than under National, and there is likely to be more public servants employed."

Given the running down of the public service under national, to the point where they might be efficient, but not effective, this may well be a good thing. After all, people who are working spend more money than the unemployed. Something businesses often forget.

countryboy said...

I thought I done sent this...? Anyhoo...

" A transformational government cannot be brought into being except by means of transformational economics. For all his faults, Roger Douglas understood this fundamental proposition. Progressive voters need a Finance Minister whose economic policies are as bold as his government’s political promises."

But roger douglas wasn't a finance minister trying to understand fundamental propositions. He's a fucking crook. He came to understand how the so called 'neo liberal' mechanism worked and exploited it to steal our tax paid for stuff and things then making sure the profits of those sell-offs went to him and his private sector cronies.
And it doesn’t need mentioning that the money to build those public amenities and cash reserves were derived from our flourishing primary industry which was, as it is today, agrarian. That fact in itself must ask: Why Auckland, why NZ billionaires, why poverty, why a brainwashed, beige paint mentality seeping out from under the cracks of the paranoid palisades of the middle class?
The creepy psychology that’s lead us into a morass of acquiescing subservience to our Masters, via ‘ Health and Safety’ for example, is daringly outrageous when one ponders that our Masters could care less whether we live or die, so long as we die working ever harder for them and to pay them for what were once OUR services and amenities.
Getting back to douglas, the weasel eyed, pig incarcerator.
Call him, and it, what it is. Criminals behaving in a criminal manner.
In Saudi Arabia it is, I believe, illegal for a woman to drive a car or go out and about without a male family member escort. In NZ, it's clear to me, illegal, and 'not the done thing old boy' to rise up and challenge douglas and his seedy mates because they were cunning enough to change acts of parliament and introduce laws to prohibit us from challenging them. I.e. hanging the fuckers from a lamp post then getting our money and amenities back.
grant roberston is a common fellow. He’s as common as a house fly hanging from the light bulb in the laundry. Needing, driven his psychiatry, to be close to the lime light while not having a gram of gumption to try and work the washing machine to clean NZ’s dirty laundry. He doesn’t want to be the blow fly to upset the apple cart.
We Kiwis need a Minister of Finance who would knock bill english out in the halls of parliament. We don’t need a thumbs-up suit full of gold fish water pretending to be a pint and a fight in the carpark.
Do we have one such political person in waiting? Anywhere? In any political party?
In my view? No. We do not. And that should worry every Kiwi who isn’t a narcissistic sadist.
Do we have politicians like, say, yourself @ Chris Trotter? Or Martyn Bradbury, or Jane Kelsey? Or Keith Rankin... etc? The answer is No. No we don’t.
There’s no one with wit, humour, an interest in societal harmony and isn’t, frankly, fucked in the head who’s also a politician? The ones we have, all of them, seem so fucking horrible. Dumb. Cowardly. Greedy. Arrogant. Careless. Rich.
Eye roll please..
4.7 million Kiwi souls, give or take. ( Deaths/shagging. )

52,000 people deriving their soul income from agrarian enterprises. (Dept Stat’s.)

That begs the question, what do the balance of 4,648,000 Kiwis (give or take as above) do ?

I think I can tell you.

They live on a false economy, that’s what they do. ( Auckland house prices anyone? )

The interesting thing ( for me at any rate.) is that there’s a va$t gap between the fal$e economy that is 4,648,000 money-spending people and the 52,000 people who earn foreign currency for our country.
The problematical problem for politicians is maintaining that warped reality.
The Lie requires high level fuck bags sieving through Universities for educations to enable them to fabricate logical fallacies to feed us while thieving from our farmers to create a false economy within which they dictate we must all live.

Kat said...

@Wayne Mapp

"If anyone thinks that Labour will be fiscally tighter than National, well all of history is against you."

Records show that since 1935 govt debt as a percentage of GDP have seen better results under Labour.

In plain language Labour govts in NZ have performed better fiscally than National govts.

The fifth Labour Government reduced debt from 22.6 per cent of GDP in 2000 to 5.5 per cent in 2008. That same Labour Government went from a $386 million deficit in 2001, to a $2.8b surplus in 2008. During Key's National Government, debt as a percentage of GDP went from 9.1 per cent in 2009 to 24.6 per cent in 2016.

You may have a point Wayne if you dissect just how the govt books are managed. However this coalition govts success will not be measured in fiscal policy and/or public debt but rather how the lives of New Zealanders have been improved overall.

Bring back the MOW.

Jays said...

You do understand Chris, that the New Zealand that Lange inherited from Muldoon was economically knackered, right?
Its not like it was surpluses as far as the eye can see like it is at the moment. This economic Armageddon was brought about by insane welfare for practically everyone including farmers.
If Lange hadn't done what he had done, we would have gone the way that Greece is going.
So, it is all well and good to criticise Lange, but he did an ugly but necessary job

greywarbler said...

I feel certain that Jays is talking wildly. Would anyone else like to put me right especially on his point that if we had continued under Muldoon's regime we would have 'gone the way that Greece is going'. And by the way Greece has already gone on its way, it isn't slowly going down. And if you look at a world status comparison, on certain measures, we aren't doing as well as Greece. I think that housing might be the stat I noticed.

As I think that our trend to reduce taxes of the the wealthy and give them and corporates, legitimate ways to not have to pay anything, I think we are actually following in Greece's footsteps. But then what do I know. But looking at the evidence of our good husbandry of the country, I notice that there are solo mothers who are having severe hardships. Perhaps we need some good wifery and less theorising and 'passing the parcel' of living standards around the largely male self-congratulating virtuous circle.

Perhaps there will be some home hints from one of the women admitted to this circle. I see Dame Jenny Shipley on the front of Womans Weekly ready to put in her tuppence under the heading "20 Years On, Bullies, Jacinda, and What They don't want me to tell you". Who are they? Which hat has she got on today?

greywarbler said...

I think I was writing about our financial husbandry and its lacks, and the need for more female husbandry (wifery?):

This from the Herald and TS.
The charity has had overwhelming numbers of people seeking emergency help this Christmas with hundreds lining the streets – some since midnight – as the festive season draws near and puts pressure on those who can barely put food on the table.

City Missioner Chris Farrelly estimated that by the end of this week they would have assisted 4000 people – and 80 per cent or 3200 of those would be women.
“Women carry the burden of poverty in New Zealand, disproportionately to anyone else. They make huge sacrifices for children.
(Auckland City Mission needs donations).

David Stone said...


From memory Muldoon went out with NZ owing around $ 14 Billion. After selling off State assets to pay off debt the Douglas government had us owing around $80 Billion a few years later . People do like to turn history on it's head.

Guerilla Surgeon said...

I think I've said this before, but the situation in Greece – aside from the fact that people avoid taxes like mad – is more a German problem than a Greek problem. I've read several articles that suggest this – that the German attitude towards money, "responsibility" and austerity is the root of it all. And that if Greece had been able to do value its currency there wouldn't have been a problem.
As far as Muldoon went, yes he had gone too far – particularly by subsidising farmers, but there were countries that were in similar situations that managed to get out of them without taking an very large axe to the social welfare system and other government spending. At least I do remember arguing about it at the time. :)

David Stone said...

Like Varoufakis frequently says Greece is the canary in the mine. Debt is steadily seeping through the western world like rising sea level, through societies and countries . Greece is the first atoll to go under. It won't be the last.
Greece was largely self sufficient, only about 12% of it's economy was international trade, unlike ours, Most of their imports were crude oil , a result of them having the world's larges shipping fleet, and the minor export was refined petroleum products.
They had enormous refining facilities and refined most of Europe's oil. But the refineries were ageing and closed because they didn't conform to the EU's new environmental spec's so now all the oil is refined in Germany's new refineries instead. And all their prime olive oil is processed and bottled in Germany too and most of the sales revenue from Greek olives is collected by Germany.
They should never have joined the EU , it was not in their interests.
David J S

pat said...

@ David Stone

1982 external debt 6.8 billion or 23.5% GDP....

Would have been interesting to see how things would have turned out under a continuation of Muldoons policies (yes he had plenty of faults, but he had NZs interests at priority, can the same be said of those that followed?)....the international tide was against him and his economic school was about to be overturned but the Scandinavians fared alright.

Jays said...

Just as socialism in the extreme fails miserably also, but also seems to go rather nicely hand in hand with facism. Stalin, Hitler, etc.