Latest news with #fiscalresponsibility
RNZ News
21 hours ago
- Business
- RNZ News
Despite decades of cost cutting, governments spend more than ever. How can we make sense of this?
By Ian Lovering* of International relations academic Ian Lovering delves into some of the history and social structures at play behind decisions about the national budget. Photo: RNZ Analysis : Recent controversies over New Zealand's Ka Ora, Ka Ako school lunch programme have revolved around the apparent shortcomings of the food and its delivery. Stories of inedible meals , scalding packaging and general waste have dominated headlines. But the story is also a window into the wider debate about the politics of "fiscal responsibility" and austerity politics . As part of the mission to "cut waste" in government spending, ACT leader and Associate Education Minister David Seymour replaced the school-based scheme with a centralised programme run by a catering corporation. The result was said to have delivered "saving for taxpayers" of $130 million - in line with the government's overall drive for efficiency and cost cutting. While Finance Minister Nicola Willis dislikes the term "austerity", her May budget cut the government's operating allowance in half , to $1.3 billion. This came on top of Budget cuts last year of around $4 billion. Similar policy doctrines have been subscribed to by governments of all political persuasions for decades. As economic growth (and the tax revenue it brings) has been harder for OECD countries to achieve over the past 50 years, governments have looked to make savings. What is strange, though, is that despite decades of austerity policies reducing welfare and outsourcing public services to the most competitive corporate bidder, state spending has kept increasing. New Zealand's public expense as a percentage of GDP increased from 25.9 percent in 1972 to 35.9 percent in 2022. And this wasn't unusual. The OECD as a whole saw an increase from 18.9 percent in 1972 to 29.9 percent in 2022. How can we make sense of so-called austerity when, despite decades of cost cutting, governments spend more than ever? In a recent paper , I argued that the politics of austerity is not only about how much governments spend. It is also about who gets to decide how public money is used. Austerity sounds like it is about spending less, finding efficiencies or living within your means. But ever rising budgets mean it is about more than that. In particular, austerity is shaped by a centralising system that locks in corporate and bureaucratic control over public expenditure, while locking out people and communities affected by spending decisions. In other words, austerity is about democracy as much as economics. We typically turn to the ideology of neoliberalism - democracy as much as economics. We typically turn to the ideology of neoliberalism - "Rogernomics" being the New Zealand variant - to explain the history of this. The familiar story is of a revolutionary clique taking over a bloated postwar state, reorienting it towards the global market, and making it run more like a business. Depending on your political persuasion, the contradiction of austerity's growing cost reflects either the short-sightedness of market utopianism or the stubbornness of the public sector to reform. But while the 1980s neoliberal revolution was important, the roots of austerity's managerial dimension go back further. And it was shaped less by a concern that spending was too high, and more by a desire to centralise control over a growing budget. Godfather of 'rational' budgeting: US Secretary of Defence Robert McNamara (right), with US president Lyndon B Johnson (centre), in a Cabinet meeting, in 1968. Photo: Yoichi Okamoto - Public Domain Many of the managerial techniques that have arrived in the public sector over the austerity years - such as results-based pay, corporate contracting, performance management or evaluation culture - have their origins in a budgetary revolution that took place in the 1960s at the US Department of Defence. In the early 1960s, Defence Secretary Robert McNamara was frustrated with being nominally in charge of budgeting but having to mediate between the seemingly arbitrary demands of military leaders for more tanks, submarines or missiles. In response, he called on the RAND Corporation, a US think tank and consultancy, to remake the Defence Department's budgetary process to give the secretary greater capacity to plan. The outcome was called the Planning Programming Budgeting System . Its goal was to create a "rational" budget where policy objectives were clearly specified in quantified terms, the possible means to achieve them were fully costed, and performance indicators measuring progress were able to be reviewed. This approach might have made sense for strategic military purposes. But what happens when you apply the same logic to planning public spending in healthcare, education, housing - or school lunches? The past 50 years have largely been a process of finding out. What began as a set of techniques to help McNamara get control of military spending gradually diffused into social policy . These ideas travelled from the US and came to be known as the " New Public Management " framework that transformed state sectors all over the world. Dramatic moments of spending cuts - such as the 1991 " Mother of all Budgets " in New Zealand or Elon Musk's recent DOGE crusade in the US - stand out as major exercises in austerity. And fiscal responsibility is a firmly held conviction within mainstream political thinking. Nevertheless, government spending has become a major component of OECD economies. If we are to make sense of austerity in this world of permanent mass expenditure, we need a broader idea of what public spending is about. Budgets are classically thought to do three things. For economists, they are a tool of macroeconomic stabilisation: if growth goes down, "automatic stabilisers" inject public money into the economy to pick it back up. For social reformers, the budget is a means of progressively redistributing resources through tax and welfare systems. For accountants, the budget is a means of cost accountability: it holds a record of public spending and signals a society's future commitments. But budgeting as described here also fulfils a fourth function - managerial planning. Decades of reform have made a significant portion of the state budget a managerial instrument for the pursuit of policy objectives. From this perspective, underlying common austerity rhetoric about eliminating waste, or achieving value for money, is a deeper political struggle over who decides how that public money is used. To return to New Zealand's school lunch programme, any savings achieved should not distract from the more significant democratic question of who should plan school lunches - and public spending more broadly. Should it be the chief executives of corporatised public organisations and outsourced conglomerates managing to KPIs on nutritional values and price per meal, serving the directives of government ministers? Or should it be those cooking, serving and eating the lunches? * Ian Lovering is a lecturer in international relations, at Te Herenga Waka Victoria University of Wellington. This story was originally published on The Conversation .
Yahoo
4 days ago
- Business
- Yahoo
Another candidate is running against Finstad in the 1st Congressional District
Jun. 16—ROCHESTER — Oliver Morlan, a Zumbro Falls native and member of a family-owned business, announced that he is running for Congress in the First Congressional District as an independent candidate. The seat is currently held by Rep. Brad Finstad, a Republican. "I'm running to increase independent representation," Morlan said. "I'm trying to inspire that not just here in the district, but across Minnesota. I just feel that the country is in need of desperate change." A 2018 graduate of Century High School and self-described lifelong musician, Morlan, 25, said there is public impatience with how Congress is conducting its business and an appetite for holding the body "fiscally and ethically responsible." He said both parties are guilty of passing misleading spending and budget bills that "run up the deficit, cause massive inflation and are too big to fully scrutinize." Jake Johnson, a longtime teacher with Rochester Public Schools, is running for the DFL endorsement to challenge Finstad for his congressional seat. Finstad was elected to Congress in a 2022 special election and has since been re-elected to two two-year terms in the GOP-leaning district. Given the dominance of the two-party system, independent and minor-party candidates have a poor track record, historically speaking, of winning elections. Often lacking the fundraising prowess and infrastructure of the major parties, they struggle to get the name recognition necessary for victory. There are currently no independent members serving in the House of Representatives. With little political experience, Morlan acknowledged that he was "running against all odds" and that he would be relying on his "own resources" and a "lot of community support" to compete. Still, he argues that the environment was favorable to an outsider and pointed to the criticism directed at Finstad for failing to hold in-person town hall meetings. "I think that kind of non-representation might be the key factor here," Morlan said. Morlan said he plays a leading role as a trainer for D&M Industrial Cleaners, a commercial cleaning business that serves clients across southeastern Minnesota. As a musician, Morlan worked a short stint as a teacher at Pure Rock Studios in Rochester. Morlan said he supported term limits and was a tax-cut advocate, but would vote against President Donald Trump's "big, beautiful" bill that would extend the tax cuts passed in 2017 because "it is just too big." "The way this country was set up was so that regular people from any background could throw their hat in the race and see if they could make change in this country," Morlan said. "And I feel that we've kind of gotten away from that in more recent times."
Wall Street Journal
4 days ago
- Business
- Wall Street Journal
Rand Paul's Standoff on the Border
How much does it cost to secure a border that President Trump has already closed? The Administration wants to maximize spending on border measures that aren't likely to cut illegal migration any further. But Congress can strike a better balance between security and fiscal responsibility. The Senate Homeland Security Committee released text Thursday for the border section of the reconciliation bill, and its plans curb the excesses of the version the House passed last month. The biggest loser is the border wall, which would have its new funding slashed to $6.5 billion from $46.5 billion in the House bill. The Senate proposal devotes $39 billion to the border compared with the $62 billion approved in the House. These lower funding levels are a better match for the current state of the border. Fewer than 13,000 illegal migrants have been apprehended while crossing the border in each of the past three months, compared with a peak of more than 300,000 in a single month under President Biden. President Trump halted illegal migration by pausing new asylum claims, which didn't require tens of billions of dollars for new barriers and surveillance. Yet the White House wants to mark its agenda with a big dollar figure, and it's preparing to steamroll Senate opponents. When Sen. Rand Paul, who leads the Homeland Security Committee, described his spending plans on X last week, Trump adviser Stephen Miller accused him of 'trying to cut funding' for border security. It's usually a Democratic tactic to blast smaller spending increases as 'cuts,' but Mr. Miller used the line to lobby GOP Senators during a visit to Capitol Hill.
Yahoo
10-06-2025
- Business
- Yahoo
Editorial: Hoping for a bond market crash to take down MAGA? Please wish for something else
Americans unhappy with President Donald Trump's second term have taken to wishing for something they shouldn't. If only the U.S. Treasury bond market were to crash, the thinking goes, then Trump would be forced to change his policies. Bond traders could simply knock down the whole economic house of cards and then, presto! Goodbye to tariffs and hello to fiscal responsibility. Time for a reality check: First, a bond market crash would be a disaster that would cost Americans dearly for years to come. Second, the bond market sure doesn't look like it's going to crash. How do we know? No one can predict the future, but for decades Chicago has played a leading role in the Treasury markets via CME Group futures contracts. And one great thing about futures is that anyone can see what real traders putting real money on the line believe is going to happen in, yes, the future. The most active 30-year Treasury bond and 10-year Treasury note contracts show expected prices through the end of the year, and there's been volatility, for sure. They also reflect an unusual pattern of interest rates staying relatively high even as the dollar weakens, probably because Trump's trade wars do indeed stand to hurt the economy, as does the lamentable lack of fiscal discipline in Congress. So far, however, the markets are not pricing in anything like a crash. In fact, long-term interest rates are less than 5% and inching lower in recent days, which is hardly a sign of an imminent crisis. Of course, markets can turn on a dime, as the United Kingdom experienced three years ago. A newly elected prime minister, Liz Truss, pushed through an irresponsible budget that would have funded huge tax cuts with increased borrowing. Sound familiar? In that case, the reaction was swift: Traders dumped British bonds and sent the British pound plunging against the dollar. Truss wound up being forced out after just 50 days in office, and the British economy is just now starting to recover. The same could happen to the U.S., in theory. But in fact, the U.S. economy has a much greater capacity to absorb bad policy than did the U.K., because it has been doing quite well. At a speech earlier this month, Austan Goolsbee, who heads the Federal Reserve Bank of Chicago, likened the economy to a buff gym rat with a six-pack of abdominal muscles. Trouble is, this gym rat has a layer of fat over the muscles, so they're hard to see. In his analogy, the underlying economy is strong, but it's being obscured by the uncertainty of Trump's on-again, off-again tariffs, now popularized by the acronym TACO, among other destabilizing policies. But with unemployment at just 4.2% and inflation at 2.3% (and closing in on the Fed's 2% target) the 'hard data' are still amazingly healthy. Not only did the U.S. avoid an oft-predicted recession over the past several years, but growth picked up momentum throughout 2024. The U.S. remains the world's wealthiest country, and if it decided to curb its growing debt by raising more revenue, it could well afford it. But the political will is missing, and 'soft data' such as surveys of consumer sentiment and business investment plans are decidedly negative. At the same time, some notable experts are warning of trouble ahead if the U.S. maintains an unsustainable course. Hedge fund kingpin Ray Dalio recently told Bloomberg he gives the U.S. 'three years, give or take a year,' to avoid an economic 'heart attack.' Jamie Dimon, head of JPMorgan Chase, similarly predicted the U.S. is headed for 'a crack in the bond market,' adding, 'I just don't know if it's going to be a crisis in six months or six years.' Treasury Secretary Scott Bessent reacted to Dimon's prediction by noting that Dimon loves to make predictions and, according to Bessent, 'None of them have come true.' What is true is that given the strength of the economy, interest rates should be lower. In continuing to issue a massive amount of debt, America is beginning to pay what British pundits during the Truss fiasco took to calling the 'moron risk premium.' That's the extra cost a country pays in the form of higher interest rates on its debt when incompetent leadership raises the risk of financial instability or default. In his recent talk, Goolsbee acknowledged that U.S. interest rates are higher than they should be because of policy uncertainty. Getting that 'dust out of the air,' as he put it, would tee up lower rates. 'If you have stable, full employment and inflation going to target, rates can come down.' Lower rates make it cheaper to obtain loans and manage debt, which would encourage consumer spending and business investment. Washington needs to cut the chaotic policymaking and embrace responsible political solutions without bond vigilantes forcing the issue — as much as Trump's critics wish they would. _____
Wall Street Journal
06-06-2025
- Business
- Wall Street Journal
Congress's Budget Referee Confronts Swarm of GOP Critics
WASHINGTON—Phill Swagel expected this. Well, most of it. Swagel, a mild-mannered academic economist, runs the Congressional Budget Office, the fiscal scorekeeping agency getting blasted by Republicans as they try to push their tax-and-spending megabill through Congress by July 4. They say CBO is too pessimistic on economic growth and tilts against the GOP, unfairly fueling charges that the measure is fiscally irresponsible.
