Friday, August 26, 2005

Brian Easton: What the Tax Debate is Really About

[Leave] aside the rhetoric of greed, underneath the National tax cut package is the language that government spending should be restrained and cut, and that more of the nation’s spending should be in the hands of individuals. We recognise here the return of those who dominated economic policy in the 1980s and 1990s. We can say that with some confidence, because at various times when he was governor of the Reserve Bank, Don Brash stepped outside the narrow confines of monetary policy and talked about his economic prescription. A case in point was his speech to the London based Hayek Society, Friedrich Hayek being one of the leading thinkers of the right wing individualistic more-market solutions I described earlier.

I cant help thinking that National’s underlying agenda is the oft stated right wing strategy of giving substantial tax cuts and then forcing public expenditure cuts to rebalance the budget. It has not worked well in the US, but our political process is more disciplined, as we saw in 1991 when an incoming National government imposed severe expenditure cuts.

Does the public wants more money in its pocket, but having to finance expenditure currently borne by the government. Undoubtedly the public wants more money in its pocket, together with the existing level of government expenditure. Some are willing to sacrifice money in its pocket in order to maintain and increase public expenditure.

Of course, there are more-private less-public and the more-public less-private advocates. In principle the election is a test of which group is in a majority, although it is possible that other factors – including non-economic ones and a misunderstanding about the nature of the choice which the public face – may confuse the purity of the test.

Link [Chur Christian]

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