Tuesday, March 28, 2017

Labour/Green budget rules make sense


The more the Green Party talks about economic policy the more it is perceived by some on the left as becoming mainstream and accepting neoliberal philosophies. Sue Bradford and the CTU have protested that the agreed fiscal constraints announced by Labour and the Greens are a sellout and that the growing inequality in New Zealand won't be addressed under the proposed Budget Responsibility Rules. Many on the left are feeling uncomfortable that the business community and David Farrar are praising the announcement.

There is a widely held perception that National Governments constrain spending, and are therefore fiscally responsible, and Labour Governments spend large and accumulate debt. There is also another perception that to rectify the social inequalities in New Zealand, and address our environmental degradation, then fiscal restraints must be put to one side. Both perceptions display a good deal of economic ignorance.

There are also some Green supporters who want to see the Party pushing for monetary reform to reduce the power of the banking industry and promote the introduction of systems like Sovereign Money. While this may be philosophically sensible, it is politically impractical. Economic reform is not an election winner (as Social Credit has consistently discovered) as few voters understand economic theory to a level where they would comfortably embrace radical change.

The Green Party has a holistic approach to economic decisions and supports the view that environmental, economic and social policy should be strongly interconnected. The Greens economic policy is intended to deliver "...a resilient, flexible economy capable of adapting to new challenges, delivering meaningful work for our people and a healthier environment for us all". Working towards a fair and sustainable future is a key part of the vision.

In 2013 Russel Norman supported National's Public Finance (Fiscal Responsibility) Amendment Bill because many of the provisions within it made good economic sense. His supporting speech is worth listening to in its entirety. His idea of extending the bill to manage our social and environmental capital in the same way as our economic capital is sensible. To establish a sustainable economy, a government must live within its means and be future focused. The proposed budget management principles fits this approach.

Those who regard the Green/Labour determination to pay off debt, and work towards budget surpluses, as neo-liberal concepts don't appreciate that being fiscally responsible is not something owned by the Right. The current National Government has never been fiscally responsible as it has increased government debt considerably, invested in unsustainable industries and spent billions on motorways that don't pass basic cost benefit analysis. Its reputation is a product of effective spin rather than reality.

What is really important within any government budget is how revenue is generated and what the spending priorities are. Labour wants to review the current tax system and the Greens have been consistent in wanting policies and spending to be independently costed. Establishing a fairer tax system and sound processes for establishing new spending is essential. Increasing revenue can also be done within the existing system by diverting the energy used to hound beneficiaries to chase tax fraudsters instead (up to $10 billion of potential revenue), for example.

The Greens support of a carbon tax and a capital gains tax will be at the forefront of any coalition discussions. Both will be important in shifting to a more sustainable economy and being more environmentally responsible. The home insulation scheme that the Greens established through an early MOU with National was a huge success with a cost benefit ratio of almost 4:1. Good social and environmental policy actually makes economic sense too.

Reassurance that a Labour/Green Government won't launch into an irresponsible spending spree, as National will claim, is necessary to be elected in the current political environment. This is just a pragmatic consideration for becoming electable. Once in Government a shift in spending priorities away from corporate welfare, subsidising landlords and building unnecessary motorways will mean billions to reinvest into housing, health, welfare and education. The social, environmental and economic benefits will be enormous.

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