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  • rmacculloch

Ardern & Luxon debating the UK has shown both their limitations: neither are supply-side reformers

Prime Minister Ardern has been going after the Leader of the National Party, Chris Luxon, in Parliament, claiming his policy of cutting the top tax rate would lead to a similar meltdown in NZ as being experienced in the UK. Luxon refutes the claim, arguing tax cuts would be financed by reducing "waste" (which doesn't seem to include corporate welfare to Nats) and, anyhow, public debt as a proportion to GDP is way lower in NZ than it is in the UK.

What a puerile debate. Seems neither leader has much of a clue how to lower the cost of living by engaging in the only known way in economics - that is, by implementing "supply side reforms".

So what is the objective of supply side reforms? First, to create a stable macroeconomic environment by balancing the government budget (spending=taxes) and by keeping inflation low. Second, to implement micro-economic reforms that allow business innovation to flourish. Supply-side reforms recognize that long-run growth comes from private-sector technological improvements. To encourage such activity, one must secure property rights & ensure that the main function of regulation is to promote competition and a level playing field - rules must not be a barrier to innovation and impose costs greater than benefits.

Are Labour engaging in such reforms? No way. Inflation is out-of-control, budget deficits have been huge & monopoly behavior is rampant. Kiwi leftists associate anti-competitive behavior with supermarkets and the construction industry, yet refuse to talk about monopoly power in health-care (where we now have one huge supplier called Health NZ) or monopoly power in education. Amazingly, the majority of health-care suppliers in (practically socialist) France and (nearly socialist) Canada are private, not to also mention places like Taiwan. That doesn't stop these kinds of nations having universal health-care systems. Why do they have this structure? To promote competition & lower costs.

By the way, is this current Labour government fiscally conservative? No way - the Treasury Long Term Fiscal Forecast shows a totally out-of-control fiscal situation in which our future taxes, given current rates, cannot remotely keep up with health and pension outlays. The result is an exploding public debt path. PM Ardern & Opposition Leader Luxon have both embarked on a cover-up of gigantic proportions when it comes that issue, since it is in neither of their interests for this matter to get mainstream media coverage. All Ardern is referring to when she talks of an improving fiscal situation is the next few years - that is, up to when she quits politics. Want the proof? Here it is:

So is the Opposition National Party any better than Labour on a single one of the above issues pertinent to lowering costs on the supply side? No. Neither of those parties is promoting anything that looks like supply-side reforms, particularly in terms of health-care, which is the government's single biggest item of expenditure, by far.

What's the moral of the story? Don't be suckered by the stupid Parliamentary Debates in which Labour & National are both slyly trying to con the public into thinking they have answers to our cost-of-living problems. Labour's "solution" is to spend more on welfare to those who cannot afford to pay their bills whereas National's "solution" is to do a tax-cut to hand a few more bucks to those who can't afford to live. It truly is that pathetic. Neither is addressing the root causes of the problem.



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