Deficits and crony capitalism - Kiwi style

It's fascinating watching our local politicians, especially the National Party, following the path laid down by George W Bush in 2000 / 2001.

Throughout the election campaign in the US in 2000, Bush promised tax cuts that he said would benefit everyone, but actually benefited the top 1% of tax payers the most. The rationale for the cuts was based on the prosperity of the Tech Bubble.....and that rationale disappeared in smoke as the Tech Crash in mid / late 2000 unfolded.

But Bush went ahead and implemented the tax cuts anyway and ended the string of budget surpluses, replacing them instead with an unending string of deficits of at least US$250 billion / year prior to the invasion of Iraq and almost double that since then. His crony capitalist mates filled their pockets from the public trough through ten thousand and one PPPs in the US, Iraq and anywhere else the American Empire had a presence.

It has all ended in tears with higher interest rates to fund that deficit eventually leading to the fall of the US dollar, higher oil prices and the credit crunch not unfolding.

It's a wonder then that the National Party, in particular, with all this waste and wreckage in the global rear-vision mirror, is apparently blindly (or purposefully misleadingly) still promising large tax cuts. It says these cuts will be funded by reducing waste. So far, it has not identified any waste within two orders of magnitude of the amount of money required. National now says it will borrow to fund infrastructure and "growth"......though if there were no tax cuts, they would not need to borrow, or borrow as much, to fund that infrastructure. They are essentially saying they will borrow to fund the tax cuts.

That is exactly what George W Bush did and we know where that lead.

I'm not saying borrowing is bad. It's not.

I am saying that borrowing to fund tax cuts is bad. It is.

The way National propose to "save" money is through shifting many government services to public private partnerships - a.k.a. PPPs. I've seen PPPs operating first hand and they most often cost more than the original service, while providing less service, and they are less transparent and thus less accountable than their public sector equivalent. After all, their books are closed and their operations typically described as "commercially sensitive". The funders they are accountable to have strong political incentives to declare success even when failure is obvious.

It's a recipe for pocket-stuffing by political cronies and clients.

Even better, electoral finance laws making donations more transparent allow a government to see clearly who is donating to whom....and the winning of contracts for PPPs may be dependent on delivering exclusive donations to the incumbents. Florida under former Republican governor, Jeb Bush, is an excellent precedent. If you wanted a PPP, you had to donate to only one party - his - in order to improve your chances of getting the business.

National's entire approach is a proven recipe for more cost, less accountability, lower levels of service....and bigger deficits.

The evidence is there for all to see. The US has been doing for the past 10 years or more what National proposes to do here if they win.

Labour has tried to guess where the line between surplus and deficit may lie...and probably hoped to render any additional tax cuts impossible without cutting into "core" services that would be deeply unpopular with voters.....looking toward the 2011 election.

Large numbers of Kiwi voters, unaware of all this, plan to vote for one or other of them. It's like watching a low-motion train wreck.....