Monday, February 25, 2008

Treasury " Don't spend money.

Click to enlarge

I think I'm going to scream if I hear one more interest group (intended pun) apply pressure to the government to not spend money. I don't have any problems understanding the economic rationale, however, that shouldn't be the overwhelming consideration.

In Victoria we have seen a government too paralysed, by fear, to spend money, and when they do it is on the basis of public private partnerships.

Now, I have a fundamental problem with this. My argument is simple, but I think it should only need to be relatively simple.

It is as follows. Traditionally, we paid taxes, to the government, in order that the government would spend the money in ways that would benefit the community. Now, we didn't always agree with every cent of expenditure, however, overall most people, I assume, would agree that generally we were better off as a result of this.

Now, we pay taxes, however, it would appear that the government is too scared to spend the money and therefore decides to hold onto the money. Then, when we really need something, it engages a private public partnership to complete whatever project.

Therefore, we now pay twice, plus a margin sufficient to provide the private part of the transaction an adequate profit to justify their involvement.

Maybe, this is why government expenditure causes inflation.
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