Gordon Campbell on Treasury’s plans for Kiwirail

Column – Gordon Campbell

Is there any more terrifying phrase in the English language than Treasury recommends? The latest idiotic idea to emerge from the Treasury lets close down Kiwirail deserves to be filed away alongside previous gems such as Treasury push for …

Gordon Campbell on Treasury’s plans for Kiwirail

Is there any more terrifying phrase in the English language than “Treasury recommends”? The latest idiotic idea to emerge from the Treasury – lets close down Kiwirail – deserves to be filed away alongside previous gems such as “Treasury push for bigger class sizes” and “Kiwisaver providing poor value for money, Treasury says” and “Treasury recommends big tax cuts for top tax bracket”.

What is it in the water supply at No 1 The Terrace that makes it such a reliable source of Looney Tunes right wing extremism? It’s been that way for well over 30 years, ever since its advice stream began to be captured by the minions of the Chicago School in the late 1970s, early 1980s. Its plan to close down Kiwirail was contained in the pre-Budget advice it offered to Finance Minister Bill English, who rejected its most extreme formulation – close down the rail network and launch a year long public relations ‘consultation’ to soften up the public for the pre-ordained decision – while still accepting the thrust of the Treasury argument :

While government ministers rejected the idea initially they only intended providing money for KiwiRail for this financial year. But a later paper reveals it agreed to a two-year funding commitment after the company expressed worries about its long-term planning if it had only one year of funding confirmed.

So the meter on Kiwirail is running, and it currently has only a two year funding commitment from the Key government. This is insane. Yes, rail does require an ongoing government subsidy. So does the roading system. So does the health system. So does the education system. Rail – as every other developed country and Third World country recognises – is an essential part of the national transport infrastructure. In fact, rail’s importance is growing as public transport and rail freight becomes increasingly seen as a crucial means of cutting emissions and countering climate change. In other countries, rail is expected to be efficient, but is not expected to turn a profit. Here and elsewhere, it has limited potential for cutting costs, any further at least than it has done in New Zealand already, over the past decade or more. Even Treasury acknowledges the problem :

In its analysis the Treasury said rail had high fixed costs and it faced a challenge trying to reduce them.

To Treasury though, this is but a prelude to the alternatives that it outlines: shut it down altogether, or downsize it to merely a freight operation between Auckland, Hamilton and Tauranga, an option that would enable rail to – hallelujah ! – turn a profit. No, I’m kidding. Treasury didn’t actually say ‘hallelujah.’ But as with many of its barmier ideas there was an implied “ Praise God ! And Milton Friedman his only true prophet!” in the conclusions. Alas, Treasury appears to have fallen victim to an outbreak of siderodromophobia.

Personally, I’d favour taking a close, hard look at Treasury’s own activities, or at least consider the idea of contracting out its intellectual freight operations. We already have one barmy taxpayer funded right wing think tank – the Productivity Commission – so do we really need two of them? We could either close Treasury or strip it back to its core business ( ie, bean counting the workings of other government departments) and leave the thinking and the planning and the policy forming and the recommending to other, more balanced people. If Treasury’s Kiwirail spasm is any indication, economic policy would definitely benefit from a thinker /provider split.

Hillary’s Mountain

Maybe Kiwirail could do a little crowd funding. If so, Hillary Clinton might be able to give some useful tips. Last week, the Clinton campaign announced it had raised $US45 million this year, and was well on its way to the circa $100 million target that Clinton had set herself by year’s end. This should get her through the primary season in early 2016. The even bigger bucks will come later, for the presidential run. No wonder the Democratic Party mandarins support the Trans Pacific Partnership trade deal. They do need those corporate sponsors.

BTW, if you want a really good overview of why you should oppose the TPP, the mainstream US journal Foreign Policy published an article this week entitled “Nine Ways The TPP Is Bad For Developing Countries” that makes for very sobering reading. What with the current wobblings in the global financial system, over Greece and the Chinese sharemarket meltdown, item six seems highly relevant:

The TPP goes against new thinking on best practices regarding capital controls — restrictions on the ability of investors to bring in or take out vast amounts of capital from countries overnight. Even the IMF reversed its long-standing opposition to capital controls in 2012, finally agreeing with mounting research showing that capital controls may be useful in ensuring financial stability in a crisis by stemming sudden outflows or disruptive inflows. Yet despite this new conventional wisdom, the TPP would block developing countries from using capital controls.

As if nothing was learned from the 2008 financial crisis, the TPP also calls for a whole range of financial liberalization rules that would block countries from regulating speculative financial activities and would further deregulate the financial services sector.

As for Hillary…she may well win the White House, Jonathan Chait argued in an interesting piece in New York magazine last month, but to what end ? There’s no way on current polling that the Democrats can win back either the House or the Senate. To all intents therefore, it will be a phantom campaign. Chait lists the things that Clinton will be likely to run on:

She would reform the tax code, increase public investment in research, help communities transitioning to cleaner energy sources, establish an infrastructure bank, make preschool and child care universally available, increase college affordability, expand leave time for illness and family needs, raise the minimum wage, ban discrimination against gay people, reform campaign finance, and create automatic voter registration.

Great. Yet none of these fine intentions, Chait points out, have any hope of getting through either house of a Republican dominated Congress. Instead, the real battleground for a Clinton presidency will be over a quite different agenda : namely, the one set out in Republican Paul Ryan’s Budget that envisages cuts and more cuts to government programmes stretching all the way out to 2025. As Barack Obama has done, Hillary Clinton will be left with veto-ing the Ryan Budget, while being largely unable to enact her own programme. If a Republican is elected of course, the situation changes completely – and almost every Republican contender has already signed onto the Ryan Budget as being the blueprint for the US economy, and for the ideological goal of Small Government, over the next decade.

As Chait says, the small government advocate Grover Norquist had spelled this out in 2012. All that’s needed in the White House. Norquist claimed, was a breathing Republican who had enough digits on their hand to wield a pen and sign the legislation written by others:

We don’t need a president to tell us in what direction to go. We know what direction to go. We want the Ryan budget. … We just need a president to sign this stuff. We don’t need someone to think it up or design it. The leadership now for the modern conservative movement for the next 20 years will be coming out of the House and the Senate. …
Pick a Republican with enough working digits to handle a pen to become president of the United States. This is a change for Republicans: the House and Senate doing the work with the president signing bills. His job is to be captain of the team, to sign the legislation that has already been prepared.

Therefore, Chait believes, much of the 2016 election campaign will be mere theatrics. The real political battle, if any, will be about the Ryan Budget – although obvious vested interests explain why no one is talking about it :

Journalists like personal drama, and they prefer to place the candidates and their individual ideas in the center of the portrait. The candidates themselves have every incentive to cooperate in this fiction. A president must cast himself as the author of his own destiny. Republicans have no reason to reduce themselves to the Norquistian hand that signs Paul Ryan’s bills. And Clinton needs badly to inspire base voters with promises of attaining ever greater heights. She can’t very well promise gridlock, even though the case that she is running mainly to veto Republican legislation is a powerful and consequential rationale. Whether the candidates will sign or veto the Ryan budget is the most important issue of the campaign.

And now, a Treasury sing-a-long

A few years ago, Werewolf linked to a whole raft of fine songs about trains.

For Treasury’s benefit, here’s a favourite: a charming cover version of the old “Fear of Trains” song by Magnetic Fields.

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