If one throws a dart randomly at those pieces of paper pinned on the wall, there is a good chance the dart will land on a handout provision. Those papers are the 2012 Budget.

The Budget, as tabled by the Najib administration, is an election budget. Civil servants, teachers, the police force, the armed forces, pensioners and others will get their share regardless of justifiability.

Meanwhile, the subsidy liberalization program that the Najib administration was so gung-ho about earlier has taken a back seat, half-baked and emitting a stench called hypocrisy. Idris Jala, a man who unproductively exaggerated that Malaysia would go bankrupt if the government expenditure continued to rise, now praises the Budget of goodies.

Such is the loyalty of some men to ideas and principles. The wind blows and the mind changes. There is no principle to stick to because only political convenience matters. Never mind the contradiction and hypocrisy. Voters have a short memory span. Give them money and they will go gaga. It is all about winning elections, not honesty and consistency.

The financial position of the federal government could be in a better shape if the administration had the necessary honesty and consistency instead of bending backwards to accommodate the populism monster.

Without the monster, the fiscal deficit for year 2012 — the Najib administration projects to be 4.7% of nominal gross domestic product (or RM33.8 billion in absolute terms) — could be lowered considerably. It could possibly go down as far as 3.7% of nominal GDP if all the subsidies, one-time cash transfers and other election-related handouts are flushed down the drain.

Admittedly, the drastic reduction will be a shock to the system that none might want to experience amid the present global economic uncertainty.

Yet, in times of uncertainty, it is only prudent to save for rainy days even within political needs. This is doubly true given that regardless what has been said and done about the importance of domestic demand, external demand is still wildly important to the domestic economy.

A number of analysts have already voiced out that the government’s revenue figures are too optimistic for a pessimistic world. That is all the more reason for observers to be conservative with the federal government’s finance.

The fiscal deficit can be brought down still lower even with political considerations in mind. Removing the RM3,000 one-off gift to 4,300 individuals, another RM500 one-off transfer to an expected 3.4 million persons and the KAR1SMA program that will cost RM1.2 billion off the Budget while keeping the bloated subsidy regime intact, the deficit for the year 2012 could stand at 4.4% out of nominal GDP instead of the higher projected 4.7%.

One could argue that these programs are welfare enhancing, hence they deserve to be written into the 2012 Budget. In order to forward that argument however, one has to believe in it first. Honesty is required.

Unfortunately, many of those within the government whom now say these are caring measures are exactly those whom accused these same measures of being irresponsibly populist. This suggests one thing. Their only moral compass involves one question: where did the idea come from?

If it is from across the aisle, it is destructively populist. If it comes from their side, the same measures are caring.

That is not a sincere moral system, for the currency is political convenience. The slogan is ”win the election and forget anything else.”

If honesty were of any value, these programs — regardless of whether they are labeled populist or caring — should have given way to a deficit reduction agenda. With honesty and consistency, the federal government would have a smaller deficit, so that there would be less taxation for all of us in the future.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malaysian Insider on October 10 2011.

8 Responses to “[2442] Hypocrisy hampers deficit reduction agenda”

  1. on 11 Oct 2011 at 16:37 Bobby

    If I may, summary is:
    1. Don’t trust any politicians.
    2. Not even from PR
    3. BN is the greater evil of the two.
    4. Deficit reduction? It’s like a mirage
    5. Time to change government first to effect real change

  2. on 12 Oct 2011 at 04:36 Anon C

    Isn’t it hypocritical when you condemn bn for having deficit budget but praise pr when they too have a 4.4 % budget deficit?

    There’s so much that pr can hoodwink us.

  3. on 12 Oct 2011 at 08:53 Hafiz Noor Shams

    Anon,

    I didn’t praise PR budget. Where did I do that?

    Government projected deficit-to-GDP is 4.7%. 4.4% is my calculation minus one-off transfers proposed by the administration. If I were to compare federal budget vs. PR budget, I should praise the lower ratio, not the higher one. I don’t understand why you insist I “PR too have a 4.4 % budget deficit”. What do you mean by too when the government’s projection is 4.7%?

    And you need to know, the GDP growth projection by the federal government is over 5.1x% for 2012, which is higher than PR’s more conservative 4.xx%. The larger denominator for BN suggests larger deficit in absolute terms thant that of PR. If the number is normalized to make both comparable, the federal government would still have higher deficit than that proposed by PR. The better way to see this is by comparing the absolute value of fiscal deficit as proposed by both side. The federal government’s planned deficit will be higher than PR.

    If PR cuts it transfer payment as I did to the federal budget, their projection could be lower still. But this article isn’t about PR budget.

    Moreover, the one that said these one-time transfers were wasteful was BN. Like what I wrote, if they were consistent, they wouldn’t have committed these transfers and could have lower deficit. And that is the whole point of the article.

  4. on 18 Oct 2011 at 18:43 Marlyn

    First, why do we need to have a BN vs PR Budget? None of them are apparently willing to declare the truth. We have been fed with too much sweets until we never realized that our sugar level are too high and we end up having a serious diabetics.

    These are our budget, the normal Malaysian people budget. For us, whom majority need to survive with RM2,500 monthly income, with the less fortunate group with a lesser income.

    Maybe, from your point of view, it is a budget for civil servants. I would really like to differ. None of us ever concern about civil servants (a servant, nonetheless) who is serving the local authority. They are what we call a ‘close service’ civil servants, which means they live and die at the very same local council and can be at the very same post. None of the budget are on their side. Increment of salary for example, don’t we know that for a local authority, their only income are from quit rent and another 10 to 20% from the premise license. With a quit rent and license fee that has never been reviewed for ages and increasing of maintenance cost especially for collection of rubbish, road, drainage etc2..did it ever cross our mind how in the world they need to cope with the salary increment??

    Extending the pension age to 60 years old only going to benefit the Pegawai Tadbir dan Diplomatik (PTD) people as they are appointed by the federal. These are the people whose currently sitting at the post of KSU, TKSU etc2… and if they have a very huge contact, will sit as a chairman for the GLC or special ‘Jawatankuasa’ created here and there all the time. To ensure they can sit at the very same post or at least retired with a JUSA A salary, the retirement age is being extended.

    What happen again to the officer in the local authority? If currently they are at Grade N41 and the only higher post in their grade is N48 which currently being fill up by their superior who is still as young as 40 years old, for the N41 officer getting the N48 post, they have to wait for another 20 years!!! By that time, if now he is 35 years old, he himself is already 55 years old. Can you imagine that?

    I didn’t blame you if you couldn’t understand the situation that they are facing now. We forget that the local authority are the first tier of the government, doesn’t matter BN or PR. These are the people closest to the public (or the voters, in the political point of view). We forget that these are the people whose working until early morning every time the election is going on. These are the people who has been sacrificing themselves for the government (State and Federal).

    Sadly, none of them matters……

  5. on 18 Oct 2011 at 20:55 Hafiz Noor Shams

    Here I am, arguing for smaller budget, only to be met with your argument for more compensation for local authority, accusing me of forgetting them.

    I’m devastated.

  6. on 19 Oct 2011 at 15:19 Marlyn

    I didn’t ask to compensate the local authority. I’m just trying to explain that not all civil servants getting their share from the budget as per your earlier statement.

    People must see and be aware how bad the budget is effecting them as they are the one who need to pay all the quit rent.

    The local authority are not hoping for increment on their salary….

  7. on 19 Oct 2011 at 15:20 Marlyn

    And if you may know, most of the local authority didn’t have income to even pay the salary for the staff..

  8. […] deficit down. I myself used the ratio, perhaps, to suggest politely that the government could have a lower deficit if it was not to the spat of dishonest populism the government is engaging […]

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