Budget Boredom

South African Finance Minister Pravin Gordhan will table his 2011/12 budget before parliament this week.  The media will get into a big hype and economists will pontificate as to the deep meaning of all the opaque and confusing numbers.  In the spirit of budget time we thought we’d re-post our summary of the budget speech from 1 year ago. Hopefully it can shed some light on the economic nullity about to be unleashed on Wednesday afternoon.

The Pro No-One Budget

Pravin_GordhanBudget announcement time is always amusing. The Reds always cry foul that the minister has not been pro-poor enough and that ‘labour’ has been given a raw deal. Meanwhile business hangs its head in disappointment as company taxes remain high and as the government rolls out wasteful programmes and welfare state squandering. The commies say it’s pro-business, and business says it’s pro-labour.

Both are wrong. The 2010 national government budget is not a pro-business budget or a pro-labour budget or anything else the ignorant lefties and ignorant business folk might say it is. This is a pro no-one budget, for in the end, huge deficits, growing government, state intervention, more petty taxes, onerous personal taxes and all other manner of government bungling will make us all worse off.

But in the interim the national budget will be pro-someone. It’ll be pro-government, pro-lobby groups, pro-favoured contractors, pro-cronyism, pro-bureaucrats, and pro-the banking cartel.

Meanwhile us mugs sit footing the bill for a profligate government who can’t muster even an ounce of political will to rein in spending. That’s right folks, government thinks it’s exempt from the laws of economics. But it’s not, for the government is really just part of the country and its obligations are our obligations because government does not fund itself through wealth creation but by you and me through fiat taxation. Government debt is our debt. Government bungling and wastage is our loss. Government spending is our cost.

Democratically elected governments think they have an electoral mandate to spend how they see fit. They begin to see your money as really their money, taxes as a form of obligation rather than as a form of voluntary participation in a functioning state.

I engaged with a South African Treasury official yesterday. The mindset is one of “naughty private sector needs to comply better with taxes”, rather than “how can we make a more attractive tax system that will foster rapid growth”. The mindset is one of “we let you keep x amount of your income”, rather than “you let us use x amount of your hard earned income”.

The only reason why markets aren’t spilling blood on the back of the pro no-one budget is because SA ran such a prudent fiscal ship from 1996-2008. But past prudence shouldn’t justify future profligacy.  Prudence should not be an aberation but a norm.

The SA 2010 national government budget is anything but pro-growth. The tax burden on the productive people of the country increased through a new petty regime of closing tax loopholes and introducing taxes such as a carbon tax which will be levied on new vehicles. That’s right, vehicles… you know, the sector that’s been in deep recession for three years. Government wants to make it harder for you to buy cars from a sector considered by government as strategic sector for employment . Go figure.

Too much tax, too much spending, too much debt.

This is a pro-poor budget…as in, makes us poor.

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