Michael Cullen is a very funny man, capable of a belly-laugh one-liner a minute for 20 minutes without notes. He is also a very deep man. As often as not, when the laughter had died and the wound had healed his one-liners were worth pondering.
Cullen is also a very smart man, the smartest politician I have dealt with. He is a man of strong values — what used to be called principles or ideals before managerial politics took over.
He is an emotional man, a man of sentiment. His hand-in-hand affection for his second wife, Anne Collins, was a rarity in politics at the top. For a time he battled illness and depression, yet carried a crushing workload. He emerged from that to drive through Treaty of Waitangi deals at breakneck speed. On Wednesday, leaving Parliament, he described those deals as “a wonderful experience”. Take that comment at face value.
He highlighted, in his nine years finance “stewardship”, “fiscal conservatism, accompanied by a consciously countercyclical management of the economy … crucial initiatives in tax reform, a long overdue addressing of our dismal savings record, the creation of the Super Fund, a much more pragmatic approach to supporting business, a massive increase in infrastructure spending, and a sharing of the fruits of growth, particularly through Working for Families, low unemployment, cheaper primary health care, and the restoration of the level of New Zealand Superannuation”. That, he said, reduced inequality.
Now some counter-factuals.
Cullen did stack up surpluses during the post-2000 debt-fuelled housing and consumer binge, thus letting the “automatic stabilisers” partly offset the debt mania (and greatly lower government debt).
Then Don Brash and John Key in 2005 promised to return these “obscene” surpluses to taxpayers in huge tax cuts. Cullen quarter-acknowledged that argument by promising to half-index income tax thresholds to inflation (on which he subsequently reneged).
Claiming advice from a Treasury beset by repeated “upside surprises”, Helen Clark declared a structural shift in the economy. In the 2005 budget and election campaign Cullen spent a large proportion of the surplus.
Bill English complains that if Labour had not spent so much (most of which, others would add, National felt it had to guarantee in the 2008 election though actually it could safely have skipped some guarantees), we would not now be back into fiscal deficits reminiscent of the dark Muldoon era. Cullen, he alleged on Thursday, “squandered the best 10 years that the economy will see in a generation”.
But English’s mates’ tax cuts would have raided the coffers commensurately with Cullen’s spending. The fiscal numbers for the budget on May 28 would not have been dramatically different.
English is on stronger ground with a complaint that Cullen did not use the boom years bounty to promote structural, underlying, improvement in the economy and chose to boost social spending instead.
On Cullen’s watch there developed a serious and unsustainable balance of payments current account deficit, serious and unsustainable household balance sheet distortions and serious country private-sector indebtedness to foreigners, all of which attested to an economic mirage, not a structural shift. Productivity growth slumped after rising in the 1990s.
English’s stint in finance is against a backdrop of these imbalances beginning to unwind — painfully. He faces also Cullen’s unaddressed task of lifting productivity growth, because he wants us to get richer.
This involves far more than hacking government spending a bit. So, post-budget, English will focus more on longer-term policy change in, for example, innovation and health.
And tax. English set up a series of workshops involving the Treasury, Inland Revenue and the Centre for Accounting, Governance and Taxation Research, due to report to him in June.
The brief has been to explore all options, with an eye to the 2010 budget. Such a blue-skies brief could in theory include shifting tax from internationally mobile factors (company and personal income and investment) to immobile ones (land and domestic spending) and from desired activities (earning income) to undesired ones (pollution and plunder of the commons).
Cullen couldn’t go there. Nor could National until now. Can English the conservative Southlander? In three, six or nine years the answer to that question will rank high on his political epitaph.