That's future NZ's problem

It seems the government is taking the route that all students know too well, it's a week out from an assignment being due and it's nagging at the back of your head but there's a Simpsons marathon on, what do you do? Quite simple really, write yourself a mental note saying: "I'm going to watch The Simpsons, that assignment's a problem for future me." Then when it's the night before due date and it's not done all you can do is say, "damn it past me, why didn't you handle that when you had the chance, now I've got to stay up all night doing this."

I'm referring of course to borrowing for the re-build of Christchurch. Bill English has ruled out a temporary levy for those earning over $48,000p.a. in favour of borrowing an estimated $10billion over the next two years.

First of all lets look at the reasons they should borrow and then we will come to the reasons they should not borrow.

At the moment there are actually some very good reasons to borrow the money. Because of the recession interest rates are very low which means that we can get a big influx of cashish now and use it to boost our economy, this will mean when we pay it back we will not have a huge interest bill and the boost it has caused will (hopefully) be a long term one if the funds are used correctly, for example investment in not only rebuilding of Christchurch's necessities but also investment in forward thinking infrastructure like clean energy innovation.

What I see as the main reason for borrowing over a levy is that when Standard and Poor's put us on notice last year it was because of our large private debt more than our public debt. Our private debt does rival that of PIGS (Portugal, Ireland, Greece and Spain), but our public debt is well below theirs.

If we were to implement a levy it would leave less money in the hands of the private sector to pay down debt.

Now to the reasons for a levy.

Last year's tax cuts did not promote investment in infrastructure, they instead enabled people to pay down private debt or invest offshore as this was a smart move with the US currency hovering around the 75 - 80 cent mark.

If we were to cut those tax cuts in half for those earning over $48,000p.a. we have $1billion per year more to invest in NZ, this grows the private sector and prevents us from having more foreign debt on our shoulders.

Those earning over $48,000 have the ability to shoulder more of the burden, they live in a country were it is possible to get ahead and as they have achieved good standard of living and have the means to help out they should.

In times of crisis we must pull together and those who can help out should do so.

Is borrowing for the future really how we want to deal with this situation?

The skeptic in me sees a few more reasons for borrowing as well, this Government has always had the plan of cutting public services, and by spending the last two and a bit years harping on about our debt problem, they have realised that debt may very well be a viable way to pay for the earthquake recovery and tell the NZ public that this is the best option but in doing this we have to make cuts.

I also think that the Government realises that last years tax cuts did not work but if they were to implement a levy it be like saying this very thing to the public.

Borrowing the money in some ways makes more sense but I am still erring on the side of a levy because I would like the public to see that NZ can do things on its own and a tax rise is not the end of the world and in fact it can be a good thing.

Over the last 30 or so years NZ has been force fed the mantra of "Government should be smaller, lower taxes are good and the market can fix everything." A levy may well be just the thing to show the public this is not exactly true.

Check out the Herald's point of view on the matter.