Key provides Obama with respite
Safe to say, United States President Barack Obama will have viewed his White House meeting with Prime Minister John Key as an oasis of tranquillity.
To the Americans we are friendly faces – one of the few nations fighting the Taliban who are not bailing from their commitments in Afghanistan as quickly as humanly possible.
Typical, really. New Zealand appears to pride itself in asking little in return for being a dependable support for the American government, and for its major corporates.
In turn, they seem to feel grateful about our willingness to please.
En route to Washington, Key even reportedly found time in Los Angeles to dine with the Hollywood film executives he had obliged so fulsomely during The Hobbit fiasco last year.
Despite the splendid photo opportunities on offer during the United States trip – an Oval Office handshake with Obama is definitely one for the family scrapbook – the reality is that the Key Government has far more in common with Obama’s opponents than with the embattled occupant of the White House.
Obama’s latest battle with the Republicans has been about how to reduce the American deficit. Like their New Zealand counterparts, the Republicans are stonily refusing to countenance any balancing of the books that might conceivably involve tax increases.
No matter what spending cuts Obama has offered in the hope of reaching a compromise deal, the Republicans have rejected tax increases as part of the price for saving their country from defaulting on its debts.
Rather than asking the wealthy to forego a cent of the tax cuts doled out by the Bush administration, the Republicans have seemed willing to inflict serious hardship via reductions to health, education and welfare spending. Not to mention pursuing state sector job cuts, even in a time of high unemployment. Plainly, there are parallels between this approach and the prevailing economic orthodoxy in New Zealand.
As with the Republicans, tax cuts have also been treated here as a blessing – not just to the relatively few lucky recipients, but to the productive economy as a whole.
Yet as in the United States, there has been precious little empirical evidence of the economic gains that would justify such beliefs.
In the meantime, income disparity ( with its related social costs) has increased substantially during the period that this approach has been in the ascendancy.
Is it always politically suicidal to raise taxes?
Locally, the received wisdom on this point will shortly be put to the test.
In the early 1990s, the Clinton administration raised taxes and – despite cries of horror from some quarters – the United States economy entered a prolonged boom period.
In coming months, the Labour Opposition is gambling that it can mine political gold out of introducing a moderate capital gains tax on one hand while forsaking GST on fruit and vegetables on the other, and abandoning the planned partial sales of state energy companies entirely.
That promises to be a hard sell. Not an impossible one though, given that the electorate seems uneasy about how energy prices may be affected, once private shareholders begin to drive them.