Asinine Commentariat

A Barrel of Iocane Powder

The quality of public discourse is exceedingly strained.  Sometimes you wonder whether the tyranny of the deadline is reducing public commentators to drivel.

New Zealand has just copped a credit rating downgrade.  We have gone from triple A to double A minus.  The rating agencies (wisely) point out our national indebtedness.  There are three components to national debt: government, corporate, and household.  Corporate debt levels are pretty sweet.  Nothing to worry about there.  Households are maxed out on debt on all historical norms.  This problem has grown over a fifteen year period, to 2008.  Since that time, however, households have been paying down debt in a rather salutary manner.  The consumption, borrow and spend economy has been suffering an acute hangover. 

Government debt, however, has been growing faster than kikuyu grass at the height of summer.
  The government has decided it will be classically Keynsian and try to spend our way out of national recession.  Whilst continuing to spend massive and increasing amounts on health, education, and welfare it has sought to restrain spending in government offices and the bureaucracy.  But since health, education, and welfare account for eighty percent of the government's spending budget, the government has been tinkering at the margins.  Meanwhile it's actual appetite for new spending and debt resembles the thirst of an alcoholic in a brewery.

Now the rating downgrade has occurred.  The Commentariat has pronounced that this will ignite the opposition parties.  At last they will have something to hammer the government with.  Here is John Armstrong, the chief NZ Herald political commentator:

As much as Bill English downplayed yesterday's downgrades of New Zealand's credit rating, the double whammy from Standard & Poor's and the Fitch ratings agency inevitably casts a big shadow over National's claim to be the most competent manager of the economy.  Coming so close to an election, the downgrade is a huge psychological fillip for a Labour Party desperate to realign the debate on economic management on its terms.

His colleague, Fran O'Sullivan portentously tells us

. . . what Standard & Poor's and Fitch Ratings have done with their separate decisions to drop New Zealand by one credit rating notch is hand Key's political opponents a useful weapon to challenge his Government's economic management. 

OK.  Let's just get this straight: the corporate sector has been pretty prudent; the household sector is still over-indebted, but is saving like the clappers.  The government sector is spending like there is no tomorrow, whilst earnestly supplicating its patron saint, J M Keynes.  We (rightly) cop a credit rating downgrade.  What are the opposition parties going to do?  Apart from ACT, every prescription they come up with will involve more government spending.  Every one.  Yes, they will talk about more taxes (despite the new self-imposed savings  tax most households are now under) but only to propose spending more and become more indebted than ever before.  No amount of new taxes will ever match up to the ravenous spending of Health, Education, and Welfare.  And all opposition parties (apart from ACT) want to spend up more recklessly on the Big Three.

Opposition parties are going to have to explain how more government spending and higher government indebtedness are going to improve our national credit rating.  And we are told the ratings downgrade will be a "useful weapon" according to Fran, and a "huge psychological fillup" to Labour, according to John Armstrong. 

In the words of the Dread Pirate Roberts, "Truly, you have a dizzying intellect."  In truth, we believe that the credit ratings downgrade represents a barrel of iocane powder for opposition political parties.  Let them have at it at will.  Meanwhile, let's keep it real at the Herald's Commentariat.