Pakatan, where will the money come from?
From Arul K Muthiah, via e-mail
In anticipation of the general election, we have seen the Opposition trying to introduce more policy proposals to sway key voting segments. In particular, it has targeted young, first-time voters, who make up the bulk of the more than two million newly registered Malaysian voters, and the middle class in general.
Two of Pakatan’s policy proposals announced this year are designed to strike at these two voter demographics directly. The first was a promise to write off all National Higher Education Fund (PTPTN) loans and provide free university education, and the latest, a policy that will see a reduction in passenger car prices.
Both policies have clear political objectives in mind. The student loan write-off is an attractive promise for young voters still stuck with their PTPTN debt in addition to dealing with higher living costs.
The promise of lower car prices casts a wider appeal as most Malaysian car owners bemoan having to pay more for the same car than people in other countries, which results in a bigger chunk of the salary being used to service their monthly car loans.
By selling these promises, the federal opposition is saying that it can assist with increasing your disposable income because you will have more to spend on other things and also save because these two expenditure items will either disappear (PTPTN loans written off) or be reduced (cheaper car prices).
The purpose of this article is not to examine the two proposals directly but to discuss one fundamental question that arises when political parties – especially those not in power – make electoral promises: How do they hope to pay for these promises?
If this question does not require answering, then politics would be an easy game. Promise people everything under the sun, sit back and enjoy watching voters swing your way. But we do not live in a world where the electorate believes they can get everything for free. Politicians cannot assume people are stupid, as they seem to do particularly when elections are approaching.
Apart from subsidies which many Malaysians still hold dear, most Malaysians do generally believe that the government should not increase the budget deficit and borrow more money. Most Malaysians also feel a sense of responsibility and that people should pay back whatever they borrowed and not have the government write off those loans.
Also, importantly, international investors and credit rating agencies are watching to see whether we live within our means. In an age of sovereign defaults and bailouts, fiscal responsibility is a key measure of sound public administration that will have an impact on our attractiveness as an investment destination and on our credit ratings.
As far as the federal opposition is concerned, it is doubtful that balancing the books high is on its agenda. It has not really explained how it is going to pay for its electoral promises. And just to put it on the record once again – its electoral promises amount to a very very high RM206.5 billion in the first year alone.
And this doesn’t even include Pakatan’s standard promise of an immediate reduction in the price of petrol should it take over the Government. Depending on the reduction, this could cost billions on top of whatever has already been promised.
Multi-billion ringgit promises
Let’s just put the cost of the opposition’s promises into context. The federal government development budget for 2012 was RM51.2 billion. Pakatan’s electoral promises costs 400% or four times more than the current 2012 Government’s development budget.
So if it were to fulfil its promises in the first year of office, a Pakatan federal Government would not have enough money to pay the salaries of teachers, doctors, nurses, police and army personnel, let alone have the funds for building roads, schools, hospitals or providing welfare assistance to the poor. Most of the money would have been used to deliver on its Jingga promises.
If this happens, essential services would grind to a halt and the country would cease to function. If it decides to borrow more money to fund its promises and keep the government going, the fiscal deficit would balloon from 4.7%, which it is now, to more than 25% of GDP and Malaysia would effectively be bankrupt within the first two years of Pakatan ruling Putrajaya.
Pakatan’s standard response to this is that it will “get rid of the corruption” to pay for its promises. But the question is can getting rid of corruption pay for the Oppositions RM206.5 billion promises?
