Pahangdaily and the 2009 Budget

Pahang and its budget deficit.

I came across a post in pahangdaily.blogspot.com. This blog is run and operated by sympathisers and members of non-BN parties. Recently it posted an article lambasting the Pahang MB for offering yet another budget deficit. The indiscriminate criticism is of course expected of a blog owned and operated by opposition bloggers.

I am thinking, this kind of blanket and partisan article shouldn’t be allowed to pass without a critical evaluation. I hope, these people know what they are talking about. When I was in the Dewan , I was also usually critical of the budget. And I say this without superciliousness nor smugness, that the lone opposition then, the member from Triang wasn’t ‘in the groove’ so to speak, when debating on Pahang budget. Indeed critical appraisals on the Budget came from BN ADUNs themselves- some of us that is.

Pahang has an cumulative budget deficit of probably 100 over million then and now maybe close to 200 million. When the government goes into a deficit, it means that it is spending more than the revenue it collects from taxes, and income from investments - but mostly from tax revenue.

I have said whether a deficit budget is a cause for alarm will depend on the state of the economy. If it has not reached its full development stage, you have to spend to keep growing. Not spending means not growing. If you have a balanced budget, where your expenditure and revenue are the same, it means you are stagnant. Is this what the people at Pahang Daily want?. If the government goes into a balanced budget, it means that the government is not expanding the economy. The government is not stimulating the economy by spending to boost aggregate demand.

This means that the economy will be the same size as before, unless government inaction is made up by private sector spending. But in Pahang, the private sector at this moment, isn’t too upbeat about the economy. This sentiment by the private sector is not unique only to Pahang. All over, investment spending is generally guarded.

If the government believes it can expand the economy, it needs to go into debt and spend beyond its tax revenue. It is legitimate and justifiable for the government to go into a deficit and if it is responsible, must lead the way by spending. Otherwise, running the budget deficit to zero may be fashionable, but can hardly be described as wise. It is equally stupid of us to run our mouths to say the government is stupid whenever they propose a deficit budget.

My concerns were more on :-

1. Whether the expenditure is on productive capacity.
2. Whether the additional expenditure is the result of lack of financial discipline by government departments.
3. Whether the shortfall in revenue is the result of weak government management

Also my concern, is the uncritical evaluation of the budget deficit by our ADUNs. Because most of the time, our ADUNs imagined that deficits are incurred because we spend on welfare. If they care to look closely, the portion spent on welfare purposes is a very small portion of the overall deficit. So spending on welfare is not a strong point to defend the budget deficit.

Because if our ADUNs keep using this weak argument to defend the deficit, they will miss the point really. The better defence would be as we have said above. Deficit is necessary to spend on economic expansion. To induce expansion requires applying the resources more on productive capacity. To spend wisely involves instituting financial discipline on heads of government. Enhancing education and skills for example. Building and improving productive resources etc. That, my friends, are better defences for the budget deficit.

As to Pahang Daily, they would do more justice by reading the full text of the budget painstakingly reproduced in Smalltalk. The MB’s closing speech in the Dewan wasn’t meant to cover every aspect of the budget. And a closing speech wasn’t intended to be an economics discourse.

As a final say on this deficit, analyse this: a large portion of the increase in expenditure is the result of increase in emoluments and bonuses. What does this mean on the part of the government? It means the government appreciates the contribution and role of the civil service. But this must also be used as a reminder to our government servants that the increase in salaries and bonuses, comes along with the responsibility to improve performance, dedication and productivity.