atans1

PM aiming left, to hit the centre/ Axed? PAP MPs who don’t get it

In Uncategorized on 10/08/2015 at 6:22 am

Just right of the bull’s eye (as seen by the viewer) is what the PM is moving the PAP to after years (since 1991 at least) of drifting from the left of Warren Buffett to the right of Donald Trump. If he manages it, the PAP will about where the PAP and daddy were (in terms of their economic, and political thinking) on 9 August 1965.

Going back to the beginning? A journey around a political circus ring?

Sadly as the Budget debate earlier this year showed some MPs are too thick to understand the PM, even after Squealer had tot the sheep PAP MPs the new line, “Compassion is good. We got  the money to do compassion.”

PM has some really stupid MPs who still don’t get it. Liang Eng Hwa is the worse of the lot*. Others are Kate Spade (who else?), Hri Kumat and Arthur Fong.

They don’t understand fiscal sustainability***: they should go read TRE’s Chris K on the topic. Warning: very, very chim. Example:

… contrary to the PAP’s narrative that,

  • With the exception of oil rich Norway, none of Singapore’s peers have surpluses of the same magnitude. They run roughly balanced budgets and yet judged to be fiscally sustainable.
  • Since none of the peers have rules that prohibit debt for spending, spending their debts have not stood in the way of fiscal sustainability
  • Much higher social spending does not impede fiscal sustainability.

Singapore’s extremely high debt is invested and not spent, then there is no issue of fiscal sustainability.

And then there’s the brown-noser of an NMP. I had tot she was stupid but then I concluded she made the speech because she wants to be the first NMP to become the PAP’s first disabled MP. She’s special needs really. Roy, New Citizen Hui Hui and the other young hooligans should feel free to jeer at her. 

Let’s see if she gets to be a PAP candidate: I doubt it. As for Liang, Hri Kumar and Fong, I’m sure, they’ll be axed for not getting it. As for Kate Spade, despite her stupidity, she’s invaluable to the PAP: not not juz because she’s going to campaign in her confinement. I’ll explain why soon.

Coming back to “left” or “right”, maybe as an FT columnist put it “[I]n a world of rapid technological change, we need to rethink our old assumptions about “left” and “right”;  cyberspace is ripping up many ideas about the government and class system.””

——

*This letter to ST parades his ignorance of how the S’pore budget works. He also plays the man, not the ball: in footie, he’d be red carded. With PAP MPs like him, how dare the PAP call for a “clean” GE campaign?

Fiscal sustainability remains a challenge

MR DONALD Low dismisses the dangers of spending beyond our means (“Budget 2015: In deficit, yet very prudent at heart”; last Saturday).

He is right that the Government is fiscally conservative. But he is wrong to be dismissive about the concerns raised by me and other MPs that social spending must be sustainable.

Government spending is going up steadily. The new social programmes – for example, Silver Support, higher subsidies for health care and MediShield Life, and the Pioneer Generation Package – are necessary and right.

But we must proceed carefully. As our economy matures and growth moderates, revenue growth will slow. Spending programmes, once committed to, cannot be cut back without the utmost pain and political resistance, as seen in every advanced society. There will be constant pressure to spend more; indeed, Mr Low’s article is a prime example.

Moreover, often, more government spending alone has not solved social problems. Many countries went overboard on welfare with the best of intentions but with unintended results, including massive unsustainable deficit. Now they are forced to cut back and restore financial sustainability, with the harshest impact on the young.

Mr Low ignores this and argues that if something cannot be financed sustainably by the Government, with its ability to pool risks, it cannot be done by households either, which is an unacceptable outcome.

This is a false dichotomy between two extreme choices. Every society must support those with less, find the right balance between personal responsibility and state welfare, and muster and safeguard the resources to meet essential needs.

No government can spend to meet all possible wants, or ignore how its spending will impact individual and family responsibility. Singapore is no different.

Mr Low had earlier posted an intemperately worded version of his commentary on his Facebook page which asserted that “there is something inherently flawed with the concept of sustainability”.

Significantly, he omitted this radical claim from last Saturday’s commentary in The Straits Times. But he has not retracted his earlier version, which was circulated widely online. Instead, he described it (on Facebook) as a “rant”, and thanked a Straits Times journalist for turning his “rant against the sustainability prudes into an op-ed”.

How are we to read a commentary which represents, not the writer’s sincerely held position, but a pose to gull us into believing that he holds reasonable views?

Liang Eng Hwa

MP for Holland-Bukit Timah GRC

Chairman, Government Parliamentary Committee for Finance, Trade and Industry

– See more at: http://www.straitstimes.com/premium/forum-letters/story/fiscal-sustainability-remains-challenge-20150311#sthash.3jbT6PQa.XLTXdscU.dpuf

**FISCAL DISCIPLINE AND SUSTAINABILITY

Opening the debate was chairman of the Government Parliamentary Committee for Finance and Trade and Industry Liang Eng Hwa. He emphasised the need for the Government to uphold fiscal discipline and sustainability.

Mr Liang, who is also an MP for Holland-Bukit Timah GRC, said: “Even as we spend more on our social programmes, the concern among many that I have spoken to is whether we will become a welfare state in no time and whether our people will become less self-reliant.

“Will we lose our economic dynamism and soon descend into the sorry state that some European countries presently find themselves in? How we debate this year’s Budget, in the midst of this strategic shift, can have a bearing on where we would be heading. Where is that fair balance to strike and how quickly should we expand our social programmes?”

In that respect, Mr Liang proposed that there be fiscal sustainability reviews, particularly for spending programmes stretching longer than 10 years. But goodies from the Government do not come at zero expense, noted MP for Bishan-Toa Payoh GRC Hri Kumar Nair.

Mr Hri Kumar pointed out that there are limited sources of revenue to fund spending, even as the Government moves to include Temasek Holdings as a contributor to its Net Investment Returns (NIR) framework.

“That will boost our spending power even more. But every additional dollar spent today simply means more than a dollar less for the future. More importantly, we are running out of levers to pull. After Temasek, there is no next,” said Mr Hri Kumar.

MP for Marine Parade GRC Tin Pei Ling also raised concerns about how the move will affect perceptions about the nation’s financial reserves. She said: “I am concerned about whether Singaporeans will take the NIR for granted, and fail to understand that it is something special and rare. I am concerned that Singaporeans will become over-reliant on this source of revenue, and lose the drive to save and invest, and leave something for future generations.”

TIGHT REIN ON FUNDING

At the same time, others argued that the Government must keep a tight rein on funding as social spending increases. A miscalculation could mean consequences down the road.

Said Mr Arthur Fong, MP for West Coast GRC: “We are adding on to the shoulders for future governments and Singaporeans to carry. As sure as the 2 per cent tax increase to 22 per cent for high-income earners above S$320,000, we might one day reduce that income threshold and or increase the tax rate at the same time.

“We will face that some day, hopefully not too soon, but I am sure that as the path towards more social spending and ‘topping up’ has begun, we need to be mindful of finding other means towards topping up our state coffers as well.”

The issue of Government spending also led to a discussion on its consequences – potentially creating an unhealthy mindset that the Government will take care of everything. One MP pointed out that this puts an unrealistic and unsustainable pressure on the Government to solve problems – even when that is not the best solution, or may even end up costing more.  

This gets technical but important to understand the PAP’s approach to fiscal sustainability which, in financial terms, underpin its “you die your business” attitude.

In the PAP alternate universe, something akin to religious heresy has been committed against fiscal sustainability due to the estimated 2015 budget deficit of $6.67b caused by “leaning to the left”. The budget is presented to show a big increase in social expenditures but reality is different. As Donald Low of the Lee Kuan Yew School of Public Policy, rightly pointed out;

Each year, billions are salted away for the future, via top-ups to endowment and trust funds. These are actually capital transfers that do not reflect actual spending for that year. This year, $6 billion went to such top-ups. Discounting this would virtually eliminate the deficit.”

Last year’s $8b Pioneer Generation was also accounted in the budget as spent upfront but in reality $500m pa is spent over 20 years. Again quoting Donald Low;

The Government’s presentation of its fiscal position has tended to downplay just how much fiscal resources the State has at its disposal.”

What is Fiscal Sustainability?

There is no fixed definition of fiscal sustainability because, beyond its economic definition, it is also a fiercely contested political concept. For a neutral, technocratic definition, the writer quotes former Federal Reserve Chairman Ben Bernanke

Fiscal sustainability is as a situation in which the ratio of federal debt to national income is stable or moving down over the longer term. This goal can be attained by bringing spending, excluding interest payments, roughly in line with revenues……………..Achieving fiscal sustainability, therefore, requires a long-run plan, one that reduces deficits over an extended period and that, to the fullest extent possible, is credible, practical, and enforceable.”

Simply the interplay of revenues, debt and expenditures should allow national finances be solvent over the long run but there is a very crucial point. By “excluding interest payment”, Mr. Bernanke evidence that debt need not be eliminated entirely to achieve fiscal sustainability. Neither did he say budget surpluses are absolutely essential to achieve it. This completely destroy the PAP narrative: neither the deficit spending prohibited by the PAP drafted constitution nor the government’s massive year-on-year surpluses are absolute necessities to achieve fiscal sustainability.

Surpluses not required

If a nation’s fiscal position is judged as sustainable by the two main credit rating agencies, Moody’s and S&P that nation’s sovereign rating is AAA. Here is how Singapore compares to 8 other double AAA rated countries (ignoring those rated split AAA / AA like Finland and the UK) on key measures as percentage to GDP of surplus or deficits, total government debt and social expenditures that are central to the PAP’s fiscal sustainability myth.

Country Surplus / Deficit Debt Social Expenditure
Australia -0.1% 26.3% 19%
Canada +0.3% 56.6% 17%
Denmark +0.4% 48.3% 30.1%
Germany -1.7% 42.1% 25.8%
Luxembourg +1.0% 9.2% 23.5%
Norway +10.1% 33.5% 22.0%
Sweden +0.2% 55.5% 28.1%
Switzerland 0 30.4% 19.4%
Singapore +9.2% 92.6% 2.0%

We can conclude contrary to the PAP’s narrative that,

  • With the exception of oil rich Norway, none of Singapore’s peers have surpluses of the same magnitude. They run roughly balanced budgets and yet judged to be fiscally sustainable.
  • Since none of the peers have rules that prohibit debt for spending, spending their debts have not stood in the way of fiscal sustainability
  • Much higher social spending does not impede fiscal sustainability.

Singapore’s extremely high debt is invested and not spent, then there is no issue of fiscal sustainability.

Infinite Horizon

In the fiscal realm, the state has an infinite horizon to manage its finances because the state exist in perpetuity. Humans on the other hand has a horizon limited to a lifetime. The state therefore has the ability to pool risks and manage social obligations over generations. Further, the state do so at the lowest cost because it can raise revenues and can borrow over that infinite horizon (hence, government bonds in most countries are technically risk-free). The state therefore has insurmountable advantages over citizens and companies to meet social obligations at the lowest cost.

Fiscal Sustainability for who?

A boring technical issue? Perhaps but it lies at the heart of socio-economic problems for the majority of Singaporeans. The PAP’s peculiar concept of fiscal sustainability is financial conservatism of the most extreme. So extreme, it has outsized socio economic consequences. Quoting Donald Low again

If the social needs are real – say, a shortfall in retirement spending or health-care subsidies – then how are those needs to be met? If the Government, with all its risk-pooling and demand aggregation ability, cannot finance that need sustainably, it is almost certainly impossible that households would be able to do so. The only serious alternative, therefore, is that those needs aren’t financed at all – and that many Singaporeans’ lives remain in misery as a result.”

In other words, due to the government’s extreme fiscal conservatism, those social needs are not financed at all, financed minimally by the government or financed by citizens at staggering costs. This is despite the insurmountable advantages conferred on the state. The flow chart below simplifies.

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  1. imho, there is very long way for the PM to go. The best way to ensure that is to have a sword pointed at his back, i.e. more than 1/3rd seats going opposition. And arguably, in contention with your August 1965 retrograde position, it needs to go further than that because SG 50 just ain’t SG1. Then, it is a low base. Now technological and economic advancements have extremely unequal outcomes. No amount of GDP growth will solve it and in reality make it worse. That’s the reason for equalization effect of the social market system – something the PAP don’t want Singaporeans to know.

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