Looking at the Deficit Budget differently.

I propose we look at the coming budget from a different angle, let’s get not trapped into discussing the budget type- whether surplus or deficit. It will be deficit anyway. Because of that, PM Najib sensitizes himself to Fitch Rating- why respond if international ratings are irrelevant to Malaysia’s credit standing?

Because from now on, it will become costlier for Malaysia to borrow money from external lenders who will be followed by internal lenders. Imagine the amount of debt servicing quantum which are absorbed into non-productive activity. It will drag down economic growth.

We get worked up at the type of budget. If its a deficit budget, we attacked the government on a number of points. We are not going to take that approach because we already know the drill. We know about the being Greece argument, burdening the next and future generations, we are going bankrupt and so forth.

I will even allow this government to spend its way to destruction- for if it comes to that, i.e. the government spends out of control, it will come to a stage, where it has to cut back. It has to downsize and with that it will cut back on investments, it will cut down spending.  it will shrink. Isn’t our aim, is to see this government fall? It will fall because it’s a profligate and irresponsible government spending OUR money recklessly.

The shame is in the spending itself not how the spending is made possible. We know how it’s made possible. The government takes in revenue and borrow on top of that. How does it spend this money is more important.

If the government takes in RM100 and borrows another RM50, taking from us a total of RM150, but gives us in return something valued at RM100, then we have the right to get angry. Where has the RM50 gone to? Judging from the 2013 Auditor General’s Report, the RM50 has gone into the pockets of the little and Big Stalins and Napoleons. Second, on what has the RM100 been spent on? On something good for us or financing the leaders ego trip?

We must remember this: government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens’ spending and investment to the full extent of its quantity. you take RM250 billion from us, are you giving us back RM250billion wirth of goods and services? What the government takes away from us, it reduces the same amount of money that could be made available to the real wealth creators- the workers, the private investors, the entrepreneurs. The government does not create any wealth.

These are more important issues in addition to that deficit part of the budget.

We should be worried about how the government spends OUR money, not so much about the declared deficit. It’s not a big deal if the deficit is 4.5% or 4%. Last year the government took in RM208bn as revenues. It’s spending 251bn. to make up the difference, it borrows 43bn.

After reading the Auditors Report, it is plain, that corruption, abuse, embezzlement and naked pillage has permeated all levels of government. This is a government that has not got the political will to stop all these. We haven’t got the culture of hating every form of wrongdoing. We need to develop this culture of hating wrongdoings and not as a friend suggests a culture of a fear of being audited. Indeed what came out from the Auditor’s Report- people simply don’t fear audit reports because it’s read by a wimpy government and further read by a malleable and forgiving public.

We now know the amount of public debt is huge. By the end of this year, we think it will be around RM546 billion- which should breach the 55% of GDP limit. We take into account in addition, the value of the government’s contingent liabilities or the off-balance sheet spending, that include the guarantees on the loans GLCs and selected companies take, which amount more than RM100 billion. Add together, the amount of public debt is big.

We are worried and concern. We should be but not because we love the government. If the government spend like a crazy bloke, we won’t stop him because we are actually looking at a government that spends itself into destruction.  It can’t spend indefinitely so it will have to cut down on employment, on wasteful projects.

So , whether government spending is in deficit, balanced, or in surplus is immaterial. The shame is the spending itself. When governments spend they’re by definition extracting limited capital from the private sector, so the problem is the spending, not how the spending is made possible. It spends irresponsibly- and this why we must attack the government. This is a profligate government spending with taxpayers’ money.

So, I am asking readers not to be too absorbed into dissecting the amount of public debt or the declared deficit- it shouldn’t bother us that we have a RM546 billion deficit, rather it should horrify us that our federal government collects 250 billion per year plus 40-50billion borrowings plus the national debt. What that number signals to us is that our federal government collects way too much in the way of revenues, and in spending those funds plus RM500 billion in debt and RM100billion in contingent liabilities, they are  foisting  cruelty on us. Yes, this cruel and tyrannical government robs us of capital that, if left in the private sector, would support real economic activity Heavy government spending, whether through revenue collection or deficit financing means less capital for the companies that employ us, enhance our lives.

You see- the deficit isn’t the RM40-50 billion the government tops up by borrowing- the deficit is the entire budget itself. Didn’t I say the government doesn’t create wealth? It creates nothing. So if this year, the government presents a budget of RM250 billion, this 250 billion is the DEFICIT. Since the whole RM250billion is taxpayers money, what the government does is spend what it borrows from the consolidated fund.

Because of that- our focus should be on whether we get value from the spending and where the government spends it on.