The Sincerest Form Of Flattery: That “Clarkism” continues to be the driver of Labour policy is now impossible to either ignore or hide. Why else would Jacinda Ardern's finance minister (and Michael Cullen protégé) Grant Robertson have deliberately hamstrung the incoming progressive government with his absurd, unnecessary and politically indefensible “Budget Responsibility Rules”?
WHEN THEIR FRIENDS aren’t listening, the people at the top of this government are referred to bitterly as the “Clarkites”. Specifically, we’re talking about the former staffers of Helen Clark: Jacinda Ardern, Grant Robertson and Chris Hipkins. More generally, however, the term is used to describe that fraction of the Labour caucus unwilling or unable to fault the economic and social management of Clark and her Finance Minister, Michael Cullen. That significant figures from the Clark Era: Mike Munro, Heather Simpson, Cullen himself; continue to play major, albeit behind-the-scenes, roles in the Ardern-led government, only reinforces the potency of the “Clarkite” epithet.
Those Labour Party members unencumbered by stardust-speckled spectacles are beginning to comprehend that chronic government underspending goes back a lot further than Bill English and Steven Joyce. Finance Minister Cullen was a master at finding ways of diverting public revenues away from Labour’s traditional spending priorities: health, education, housing and welfare.
Not only did Clark’s finance minister set up the so-called “Cullen Fund” in response to the non-problem of “unaffordable” superannuation; but he also made sure that KiwiSaver (and the state’s contribution to its participants’ accounts) was managed by private-sector investors. Cullen also refused to return the Accident Compensation Corporation to its original status as a pay-as-you-go scheme – thereby diverting billions of dollars into the seemingly never-ending process of fully-funding it.
Funds that could have been used to upgrade the state housing stock; rebuild the capacity and efficiency of the nation’s railways; create a world-beating public transport system in Auckland and expand dramatically the country’s decrepit mental health services were, instead, piled-up in Scrooge McCullen’s money-bins.
There was method to the Finance Minister’s penny-pinching, however.
The more a government does for its citizens, the more they ask it to do. If their demands are met, then the resulting increase in state spending can all-too-easily boil-over into a full-blown fiscal crisis – necessitating savage reductions in government expenditure and unpopular tax increases.
Of course, these latter measures are only deemed necessary by politicians who regard government deficits as sinful, and who refuse to take full advantage of the state’s monetary fecundity. For these benighted souls, among whom Clark’s finance minister must be counted, the rule remains: “jam tomorrow and jam yesterday – but never jam today.”
For Clark, the trick was to keep public expectations subdued by “under-promising and over-delivering”. For her strategy to succeed, however, it was necessary for Cullen to present the government’s books as being healthy – but not too healthy.
A modest government surplus could be passed-off as evidence of prudent economic management. Too big a discrepancy between what the government collected and what it spent, however, and the voters would expect the surplus funds to be invested in improved public services and/or returned to them in the form of tax cuts. Cullen’s knack for making his surpluses disappear wasn’t just fiscally impressive – it was politically essential.
In 2009, with the Global Financial Crisis in full swing, the incoming National Government suspended “contributions” to the Cullen Fund. Why? So that billions of freed-up dollars could be spent on keeping the economy’s head above water. Labour was highly critical of this decision: perhaps because it demonstrated exactly how much the Clark-Cullen Government had prevented itself from spending for the best part of a decade.
That “Clarkism” continues to be the driver of Labour policy is now impossible to either ignore or hide. Why else would Robertson, Cullen’s protégé, have deliberately hamstrung the incoming progressive government with his absurd, unnecessary and politically indefensible “Budget Responsibility Rules”?
Earlier this week, the Prime Minister acknowledged that she and her colleagues were aware that the previous government’s underspending was massive – they just didn’t realise how massive. And yet, not even this pre-election awareness of the nation’s need was enough to make them dispense with the Budget Responsibility Rules. Nor were they persuaded of the necessity of abandoning their “No New Taxes Before 2020” pledge.
No sensible New Zealand economist believes Robertson’s self-denying ordinances to be either necessary or ethical. If opened, the bulging money-bins described above would remove the urgency (if not the argument) for raising taxes. So, why do the Clarkites refuse to be swayed?
The answer lies in their fear of losing control. If Labour credits the people with the answers, then how are they to be kept in its debt?
This essay was originally published in The Waikato Times, The Taranaki Daily News, The Timaru Herald, The Otago Daily Times and The Greymouth Star of Friday, 13 April 2018.