Phil Goff was interviewed yesterday on TVNZ's Q + A programme and asked, ‘where-to-from-here' for the Hard Labour Party?' One of the questions was for his thoughts on how the John Key government's handling of the recession and what he'd do about tax-cuts. His response was fairly candid for a politician, and consequently demonstrated his ‘Keynesian' colours, 'The National government's tax cuts would have been for the rich; we'd have given it to the poor.”
'Our plan would have seen the economy being stimulated by the poor receiving tax cuts because they go out and spend it at the shops; the rich simply put it in the bank which means no body benefits.”
Now on the face of it, this sounds reasonable, and most people would agree - but here is the economic reality: We and the rest of the western world are in this recession due to too much consumption (see housing bubble et al) and not enough saving. Savings is the real capital which drives production long-term – WE NEED SAVINGS - NOT SPENDING! Goff & Key of course are politicians, which means their time horizons are three years and thus will only do what is politically least damaging to their vote – not what is necessary. They'll not ‘allow' unemployment, even though the market desperately needs to correct all the mal-investment. They'll not stop interfering in the economy for they think they need to control it & that they drive it.
For the foreseeable future none of the politicians will do or say what is necessary – thus stalling and worsening the inevitable economic haemorrhage; it may take a year, it may take 10 years, but it will happen. The chickens will come home to roost, and it is our kids & grandkids that will be left with massive long-range unemployment & a crippling debt. If that is to be avoided some short term pain must occur – if they continue to stall, the inevitable pain will makes this current part of the recession look like a blip.
Here's what needs to happen (but probably won't):
Government to shut the Reserve Bank; no more Mr Bollard pulling the levers of economy.
Banks to set their own market interest rates; backed by their deposits of gold or similar.
Allow the economy to work itself out of this by letting the recession take its course – no government stimulus, or government jobs summits, no government guarantees, no more government debt.
Drastically cut government spending by wiping out most of the government departments.
Massive, across the board tax-cuts; including GST, FBT and provisional tax.
Scrap the RMA and replace with common law principle of private property rights.
Significantly reduce the size and scope of local authorities. Included will be a ban on councils being involved in museums, galleries etc; the businesses that they are involved with will be sold off.
Sell off all SOE's.
Get to work on a transitional program to end government welfare.
Introduce a complete free market economy to New Zealand for the first time.