December 12, 2004

eating your cake

Colin James' Nov 30th article includes this quote:

"The government has been fiscally prudent; the private sector has not."

This alludes to the idea that the government has been carefully stashing surpluses, but households and businesses haven't.

This raises some points for me:

1. The Neo liberalists argued that government was inefficient because it was inherantly set up to spend more rather than act prudently. Interestingly very little of New Zealand's political history (post-Muldoon) would indicate that to be true.

2. Why would private organisations find circumstances different from the state? Why are we more optimistic about our ability to pay off our debt? The overall state of the economy affects income, profits and taxes equally, we have the same data, what possible reason (given that we are all rational) would private organisations and citizens have for coming to different conclusions?

Point 1 was kinda obvious, but interesting. I'd love the neo liberals to try as hard to explain it as they did to explain how it could never happen...

Point 2 worries me. Perhaps the idea that the government is being responsible is causing the population to be foolhardy. Perhaps pessimism in tax take projections is sexy in government at the moment (it certainly let Clark and Cullen take the wind out of Brash's sails). Perhaps saving is in some way unfashionable (like prunes). Perhaps people are so used to having their debt comfort zone stretched they have whole new settings. Perhaps people are lacking information about how debt works. Perhaps money is cheap and the government is poorer than the private sector? Perhaps people just think that they have no control over the slings and arrows of outrageous economic effects so they're just going to take the goodies while they can. Maybe student debt is just so big it is skewing the results (and yes, I could usefully research this, but can't be bothered right now. Maybe tomorrow morning).

p.s. For those of you who are now more depressed, anxious or irritated than you were at the beginning of this post, um.....

think kittens, or possibly pumpkins?

Posted by carla at December 12, 2004 09:15 PM
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