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.
