Hypocrisy hampers deficit reduction agenda

Hafiz Noor Shams, The Malaysian Insider

If one throws a dart randomly at those pieces of paper pinned on the wall, there is a good chance the dart will land on a handout provision. Those papers are the 2012 Budget.

The Budget, as tabled by the Najib administration, is an election budget. Civil servants, teachers, the police force, the Armed Forces, pensioners and others will get their share regardless of justifiability.

Meanwhile, the subsidy liberalisation programme that the Najib administration was so gung-ho about earlier has taken a back seat, half-baked and emitting a stench called hypocrisy.

Idris Jala, a man who unproductively exaggerated that Malaysia would go bankrupt if the government expenditure continued to rise, now praises the Budget of goodies.

Such is the loyalty of some men to ideas and principles. The wind blows and the mind changes. There is no principle to stick to because only political convenience matters.

Never mind the contradiction and hypocrisy. Voters have a short memory span. Give them money and they will go gaga. It is all about winning elections, not honesty and consistency.

The financial position of the federal government could be in a better shape if the administration had necessary honesty and consistency instead of bending backwards to accommodate the monster of populism.

Without the populism, the fiscal deficit for year 2012 — the Najib administration projects to be 4.7 per cent of nominal gross domestic product (or RM33.8 billion in absolute terms) — could be lowered considerably.

It could possibly go down as far as 3.7 per cent of nominal GDP if all the subsidies, one-time transfer payments and other election-related handouts are flushed down the drain.

Admittedly, the drastic reduction will be a shock to the system that none might want to experience amid the present global economic uncertainty.

Yet, in times of uncertainty, it is only prudent to save for a rainy day even within political needs. This is doubly true given that regardless what was said and done about the importance of domestic demand, external demand is still wildly important to the domestic economy.

Furthermore, a number of analysts have already voiced out that the government’s revenue figures are too optimistic for a pessimistic world. That is all the more reason for observers to be conservative with the federal government’s finance.

The fiscal deficit can be brought down still lower even with political considerations in mind. Removing the RM3,000 one-off gift to 4,300 individuals, another RM3,000 one-off transfer to an expected 3.4 million individuals and the KAR1SMA programme that will cost RM1.2 billion off the Budget while keeping the bloated subsidy regime intact, the deficit for the year 2012 could stand at 4.4 per cent out of nominal GDP instead of the higher projected 4.7 per cent.