Key's Deals With ACT And The Maori Party


Despite sitting outside Cabinet, Rodney Hide, Roger Douglas and their ACT Party mates are positioning themselves to be the bean counters in the new government, by controlling the reviews of government spending and regulation.

In particular, John Key has agreed to adopt Hide’s New Zealand Taxpayers Bill of Rights Bill as a government Bill – “with the aim of passing into law a cap on the growth of core Crown expenses.”

Well, it didn’t take long for pragmatism to run headlong into ideology. This Bill will in fact, offer the first test of whether the Key government will be taking a centrist approach to the business of government, or implementing the ideas of the extreme right – who, lest we forget, were supported by less than four voters in a hundred during the election, which was fewer even than New Zealand First.

Like other Act policies, the Taxpayers Bill of Rights Bill has been borrowed lock, stock and barrel from a US model – namely, the Taxpayer Bill of Rights Act aka TABOR, which was passed into law in Colorado in 1992. The state of Colorado has since found TABOR to be highly controversial, and has passed special exemptions – amendment 23 in 1999 for instance, raised the spending levels on early childhood education – in order to get around the rigid spending cap that TABOR had imposed.

Unfortunately, the exemption granted to kindergarten / primary school education spending has been at the expense of other social needs, with higher education and transportation being especially hard hit.

TABOR and reality have been on a collision course ever since. In 2005, Colorado voted to give itself a five year holiday from TABOR altogether, to allow the state’s finances a chance to recover. Ironically, shortly after Coloradans voted to free themselves from TABOR, Rodney Hide introduced the same measures into Parliament in 2006, in the shape of a private members bill.

The preamble to Hide’s Bill explicitly noted its origins in Colorado, and acknowledged that the proposal had already failed by saying “Last year, Colorado voters allowed their politicians to breach the spending cap…” It is now being revived, and fast tracked by John Key.

In sum, New Zealand is about to adopt as an instrument of restraint on government spending, a measure known to have already caused havoc, division and shortfalls in public service provision in its state of origin. The detailed evidence of TABOR’s flaws is contained in this extensive Bell Policy Center Report .

So how do the TABOR mechanisms actually work ? As in Colorado, the measures Hide has been proposing would limit the growth rate of the revenues that government can collect and spend, and allow them to be adjusted upwards only to compensate for inflation and population growth, and nothing else. Not wage increases, or a desire to improve services. If revenues exceed the prior year’s allocation, this is returned to taxpayers as a rebate.

Crucially, the measure has a rachet down effect on public services. During boom times, central and local governments are prevented from using the higher revenues to expand or to improve public services, or to save for a rainy day. Moreover, because revenues will fall during a recession, the year-to-year measurement will mean that the new base for determining spending growth will become the low revenue point created by the recession. Hence, the TABOR approach renders permanent any cuts to public services that are imposed during bad years.

An exemption from the TABOR process can only be gained through the government holding a referendum, which has to be held in the same year as the mooted increases would take effect.

In Colorado, some local governments found TABOR’s restrictions too constraining, and hundreds of cities, counties, school districts and special districts successfully appealed to voters over the years for a partial reprieve from some of the law’s provisions. In 2005 Colorado voters finally suspended TABOR for five years at the urging of the state’s Republican governor, and a host of business and community leaders. The negative impacts that delivered the coup de grace came with the recession of 2001-03. As the Bell Policy Center reports :

Tax revenues fell, and the state government [thanks to the rachet down effect] had only a 4 percent cushion to fall back on. Lawmakers were forced to make hundreds of millions of dollars in budget cuts. By 2005, Colorado’s economy was making strong gains. But TABOR’s ratchet effect prevented the state government from using the growing revenues to restore cuts to vital programs.

Unfortunately TABOR is not dead yet. In the election that saw the state of Colorado vote for Barack Obama ( and throw out an extremist ballot proposition that life begins at conception ) the same voters rejected amendment 59, which would have gutted TABOR. The problem, as one local newspaper noted, is that the opponents of TABOR “tend to be the cognoscenti, or people interested in public services.“

So, batten down the hatches. Once again, New Zealanders are going to be used as the lab rats in a nutcase libertarian experiment. To summarise, from the Bell Policy Center Report, the problems with this tool are : services can’t keep pace with growth in the economy. Temporary budget cuts become permanent. Multiple limits restrict flexibility and force false choices. Saving and planning are made very difficult. Yes, that sounds like a good idea to introduce in New Zealand.

Oh, and does the TABOR approach promote economic growth ? Within his private members Bill, Hide claims that TABOR did so in Colorado. Well, in March 2006, the Oregon Centre for Public Policy begged to differ :

A study released yesterday by the Center on Budget and Policy Priorities (CBPP), found that the sources of Colorado’s economic growth during the 1990s pre-dated the state’s passage of TABOR in 1992. Huge investments by the U.S. military during and after World War II left Colorado with high-tech firms, a young, highly educated workforce, and respected public universities. According to the CBPP study, Colorado’s job growth was somewhat greater prior to TABOR than after it passed.

According to the CBPP report, after TABOR passed, Colorado’s K-12 [early] education spending as a share of personal income declined from 35th to 49th in the nation. In addition, the share of low-income children in Colorado without health insurance doubled, even as it fell in the U.S. as a whole.

Welcome to the Reaganite past, dressed up in new clothes as a pathway to progress.

The Maori Party, big deal.

The Maori Party’s agreement with National also contained a few déjà vu elements. Ironically, Tariana Turia’s long journey from the Labour to National side of the political spectrum will see her playing some of the same roles under her new centre right wing leader, as she did under Labour.

Turia is to be the new minister of the Community and Voluntary Sector, which is the job Helen Clark created for her in 2002. She is also to become an associate minister of health? Well, that’s the job she had under Labour in 1999. Dr Pita Sharples is the Minister of Maori Affairs ? Well, Turia was the associate minister of that ministry 1999-2002, and in 2002, briefly held another of Sharples’ new baubles, as an associate minister of Corrections.

Meaning : the gains from the Maori Party agreement with National contain strong elements of been there, tried that. Why should Maori voters think that National would channel more funds, or cede more power to Turia and her colleagues over the next three years, than Labour did? Now that the Maori Party’s signature is on the dotted line though, it has a lot of expectations to meet – and Sharples will no doubt be doing his best, via his associate minister roles in education as well as in corrections. Problem is – he will not be seated at the Cabinet table to see how seriously his ministerial efforts in Maori Affairs are being treated.

For that reason on the campaign trail, Sharples and his colleagues expressed deep reservations about the worth of being Maori Affairs Minister – a post that he and the Maori Party were still deriding, only nine days ago, as a second class option –

Maori Party co-leader Pita Sharples and party president Whatarangi Winiata told reporters they hoped National would seek their party’s help to try to build a broad-based governing coalition.

Dr Sharples hoped they would get a position in a portfolio such as education, health or social welfare and not just Maori Affairs.

“We don’t want to be buried in some sort of ministry that’s going to be treated as second class,” Dr Sharples said.

On the issues of the Maori seats and the Foreshore and Seabed Act, the Maori Party have had to settle for reviews that will encompass a wider constitutional context. As Scoop suggested last Friday, the real opportunities for the Maori Party to shine lie within the social welfare area. Turia’s associate welfare position – when exercised in tandem with her role in heading the voluntary sector – will determine whether this fling with National pays off.

Reason being, National has plans to channel more of the state’s welfare delivery via church based “ faith initiatives”, and Turia will be in charge of the voluntary and community sector most closely involved. Maori and Pacific Island church based NGOs – and the likes of the Waipareira Trust – could well be in the box seat. John Tamihere and Tau Henare could find themselves batting for virtually the same team.

The trouble is, this is hardly a good time for experimentation. The global meltdown and domestic recession will be starting to lift the numbers on the dole next year, just as the new government tries to find new methods of moving people off benefits. At the same time, Rodney Hide will be doing his best to starve the government of the funds it will need to cope with the impact of the recession upon the vulnerable.

This situation will require the Maori Party to be able to defend its constituents while its partners in government will be out to limit government spending for reasons of economic efficiency, and ideological purity. Already, the suggestion that Hide may be running a ruler over the line items in her budget has drawn Turia’s anger. That potential for conflict was acknowledged by Turia, yesterday

National in its agreement with ACT has agreed for a cabinet committee to go through budgets to see if money was being well spent….

Mrs Turia showed this could be one area of tension between the two parties, when she indicated she would not take kindly to her spending responsibilities being examined by a taskforce.

“I can’t imagine anybody from the private sector to come into an office and go through the budget line by line to be able to tell us what we should or should not be doing,” Mrs Turia said.

She said her party was very close to its constituents and had given undertakings about how it would operate.

“That doesn’t include political parties who may think they know better than us.”

The stakes are pretty high. In the midst of a recession, it will be hard enough for Turia and Sharples to protect the current position of Maori from erosion, let alone show evidence of progress. If the Maori Party fails, and lets itself become seen to be the enforcement arm of the National Party on social welfare, it will be toast in 2011.