How will Anwar balance RM205.6 billion deficit with RM8.43 billion saving?

It is the time of the year where everyone claim to know economics. If they never knew or studied economics, they still want to have their say.

In the case when there is nothing worthwhile to say or criticise, some yokos like Malaysiakini's commentators resort to making a big deal out of the absence of the Prime Minister during the debate. [Read Malaysiakini here.]

Our matter is made more confusing when even a Malay Studies flunkie wants to propose his own Budget and stood up in Parliament claiming he can do better than the Prime Minister.

It does not matter to them that their Budget have flaws in numbers, thus making the whole document irrelevant. It does not matter that they are deceiving the public by having many inconsistencies with their past proposed policies in the Buku Jingga.

What matters is there are sufficient simpleton voters they can tricked into believing that they are capable of taking over and govern because they manage to produce that piece of crap.

They are not ashame to the fact that they do not have the locus standi to present such Budget and see it through.

All peliwat had given was crappy proposals of cuts and increases in expenditure through spending and taxation policies in accordance to their political objective rather than the economic well being of the country and the rakyat.

The peliwat's daughter could have been infected by craps too for claiming we have a Greece-like debt problem when our foreign debt is less than RM20 billion.

Who could not see that in her assertion that Government debt is ballooning that it was redefined clumsily as National debt and our debt is funded by local borrowing ?

Does this MP realised that there is a law to cap issuance of Government papers for Government borrowing and Government have given a commitment that it's borrowing will not exceed 55% GDP.

And the biggest crap the Malay Studies flunkie did was only to discuss expenditure and not offer a source of revenue to fund their promises.

In the study of economics, it about allocation of limited resources to maximise utility or satisfaction. Where is the satisfaction of unlimited spending without any resources?

Frugal Malaysian should read the following article we received in the e-mail:

PAKATAN’S MULTI-BILLION RINGGIT PROMISES:WHERE WILL THE MONEY COME FROM? 

In anticipation of the upcoming 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 he books high 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.

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 4 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 Ringgit promises?

Let’s analyse the 2012 federal budget. Of the total RM232.8 billion that was originally budgeted, RM148.5 billion (63.8% of the total budget) was reserved for salaries of civil servants as well as fixed charges and grants such as subsidies, servicing debt, scholarships, research grants and funds for state governments. These are all fixed charges or payments. That leaves RM84.3 billion procurement – related spending, whether it is purchasing supplies, services and assets or paying for projects under development expenditure.

Since corruption and leakages can only occur for procurement related expenditure as opposed to fixed charges like salaries, any savings can only be made from this portion of the budget. If you get 10% savings from procurement, that would be just RM8.43 billion extra – hardly enough to pay for the opposition’s election promises. Even the entire sum related to procurement expenditure – RM 84.3 billion – is short of the RM206.5 billion needed to pay for its promises to Putrajaya.

The key point is this: It is easy to say savings can be made by reducing leakages, but nobody really asks how much you can save. While 10% of procurement – related items can yield a significant figure as explained above, it is not so significant when measured against Pakatan’s multi-billion Ringgit promises that cost so much more to fulfill.

So, it is not enough for the federal opposition to say it can save by getting rid of corruption. Let’s assume that Pakatan can get rid of corruption 100% and that it will avoid the corruption scandals it has got itself into in Selangor at the Federal level. This is still not enough to pay for its pledges. It has to tell Malaysians how else it will raise the money. Will it borrow more? What programs will it cancel? Which schools will it not build? Which hospitals will to close? What taxes will go up? How many civil servants will it fire?

Unless the opposition can answer these hard questions can explain how it will raise the money to fulfill its promises, we can safely assume that either it will drive Malaysia to ruin by spending what we don’t have or, in fact, it has no intention whatsoever of fulfilling its promises because it knows it simply can’t pay for them. 

In summary, his idea of claiming to fund his promises by cutting leakage was merely a political ploy to highlight as though our corruption is left unchecked and they are so clean which they are not.

It shows how stupid the notion of funding their promises with reducing leakage.

Now, how will Anwar fund the more than RM205.6 billion of his proposed budget with only RM8.43 billion savings? The Malaysian public should ask because they have the right to know.

We are thinking borrowing from the IMF. That means being recolonised by Anwar's superpower foreign supporters. Rest my case there.

The thing is will the people be restless when they begin to see? Or will it be too late?