Responsible fiscal policy

A commentator asked:

…agree we can boost the economy if we spend but we need to spend wisely and with total transparency. So how do we ensure that the government will do just that when all the so-called spending to date is shrouded in suspicion and mired with controversy?
Unless we also work in tandem to weed out corruption, I'm afraid that "business will be as usual" with the cost of projects highly inflated to enrich certain people. The Auditor General's annual report is sufficiently proof of such blatant abuse of funds and yet no one to date has been censured and taken to task.
Actions speaks louder than words.

My answer is by demanding the government spends on things we need most. And judge them in those aspects. Allow me to continue discussing this topic.

The perceived wrongs done by the government and listed by many bloggers will surely be debated endlessly and passionately in blogosphere. I am sure of that. Critically examining what the government has spent on isn't the monopoly of anti BN bloggers alone. It's open season on UMNO and BN now. everyone knows that. Even within UMNO and BN there are pockets of conscientious bloggers. I count myself as one of those who will unreservedly condemn any government policies that injure the public.

But surely at the same time, we are drawn to a common cause of offering our thoughts on how to make good for our country. That ideal, I think isn't the monopoly of anyone. Certainly not one owned by BN or UMNO and equally not one owned by self righteous anti UMNO and BN people.

I have written the government ought to be honest on the state of our economy. The DAP's Tony Pua who is also an economist has urged the government to come clean. We speak about the same objective, despite coming from two different camps.

What we have done is, is responding to the possibility of this government having to spend money to pump prime the economy. If it has to spend, then these are our thoughts about that. Or in my blog here, my thoughts about how the government should be spending the money- our money.

Most important, the government must do it quickly. But do it properly ok. Don't do it under duress as when our military boys are needed to answer calls to serve by the UN, we used that as an excuse to award contracts to people who charge whatever price they like. If we are under duress, lets spend with cool heads.

Government spending falls into the category of its fiscal policy. As such, the more relevant issue is to assess what is a responsible government spending policy. Issues such as corruption, leakages, even downright fraud are important issues in themselves, worthy of  separate and in-depth analyses. I am sure we will not be short on that. Unfortunately we won't be able to go far into a meaningful discourse, if right from the beginning, we heckled at the idea of government spending.

A responsible government spending policy is not measured by some arbitrary accounting result called the deficit, but by the impact it has had on the real economy. This same sentiment has been echoed by others. Different fiscal policies will have different effects on output, employment and inflation. It is on the basis of these effects that fiscal policy should be judged.

Those of us, who have gone to great lengths to explain how such a modern money system works, have never advocated 'printing money' or deficit spending in unlimited amounts for anything and everything. I will argue that a responsible government policy is not one that waits for months and years for the economy to recover to see job growth, but acts immediately and directly to create jobs without delay.

I am gratified to hear a top banker, Nazir Razak asking the government to act fast. It was reported:

The government needs to execute its spending plan quickly to sustain economic activities, a move which can help to offset possible slowdown in the global economic recovery, according to a top banker.

We must insist that government  spending be intimately linked to actual production and employment. The absence of direct job creation programs indicates a government that has not taken its responsibility to the unemployed seriously. That is why I asked the government to publish data on unemployment. The blogger Hishamh has alerted to me that the DOS has published employment figures since March 2010.

I am not sure, our government has an unemployment insurance policy or a dole policy. unemployed men and women want jobs, not the dole. Paying a pittance to the unemployed (who are not producing) is not the same thing as paying a living wage to those producing something of value. It's a dignified way of earning income.

My thinking is this:- If government deficit spending fills the coffers of the non-government sector with net financial assets, then a responsible government does so for all private sub-sectors in need, and links its deficit spending to actual employment and production. So while the government could not sit idly by and watch the global financial system collapse, a responsible policy would have immediately provided relief for households, small business owners, and states, all of whom have probably received inadequate assistance in comparison with the financial sector. It has always been that way with our government. Permission to spend means giving money to distressed financial agents, giving money to companies to pay off existing debts etc.

Therefore I am sure, those anti UMNO/BN bloggers and I agree on this point:-

That, while it is true that government deficits create non-government surpluses, the real question we like to ask and answers given is, not how large the deficit is, but who benefits from the deficit and whose coffers does it fill? Right?

If the deficit went to bailing out banks, then we know exactly who accumulated net financial assets. If we knew that the deficit saved state programs and prevented school shut downs, teacher layoffs and civil servant furloughs, then we would know that it is they who 'received' the deficit. If the deficit went towards massive infrastructure investment and direct job creation, we would know exactly which individuals and which firms got the funds and how many jobs and projects were created.

So I come back to the basic question as how should we treat deficit spending? We should not be angry with the deficit itself, but we are right to ask the question which sector is earning and accumulating net financial assets as a result of the government's deficit spending. And if our unemployment is high, personal bankruptcies and foreclosures unacceptably high, broken state budgets and disappearing public programs, when we see a lot money going to promoters of Swiss challenge biddings, going to masters of direct negotiations, I think the answer is quite clear.

Our own 'Wall Street' players comprising of fund managers, bankers, big construction companies, big gaming companies- know all too well that the government cannot go bankrupt, which is why they never objects when the government socializes its losses. But once profits are to be socialised, they start making a lot of noises.

The average person, however, does not know that deficits are forever sustainable and that the government is not obligated to raise anyone's taxes to 'pay' for them. Whoever suggested that the only way of paying our deficit is by raising taxes should be shot. Because we thought that if there are deficits, then we must inevitably pay taxes we refrain from demanding the things we want most.

What do we want?

what the taxpayer genuinely wants and needs: more jobs, more infrastructure, better education, higher quality public services, and a standard of living that only a resource-rich nation as our country should and can provide. It is time to stop buying into the deficit phobia and demand that the government deficit spend … responsibly. By spending on the things we just mentioned.