The Election Cycle and Fiscal Responsibility

This post appears as a column in the latest edition of The Edge.

Written by Khairy Jamaluddin MP for Rembau and Umno Youth Chief.

As we enter an election cycle, both sides of the political divide will be sharpening their arguments in order to convince the unconvinced - perhaps the most important voting block at the next general election. As far as policy platforms are concerned, both sides will also try to impress swing voters with a mixture of short-term populism and long-term solutions, even though that mixture will be heavily skewed towards the former in an election year.

Although, both sides have either executed (in the case of the party in government) or promised (the opposition, should they win) populist policies like handouts and continued subsidy, somewhat paradoxically fiscal responsibility has emerged as a key political issue ahead of the polls. Most previous elections have never put the issue of how promises are going to be paid front and centre in the accompanying political debate. Rarely do we hear stump speeches during election campaigns saying how money will be saved. Mostly it is about how much will be spent if voters go their way.

So, when fiscal responsibility and managing the national debt crop up as election issues, we have to ask ourselves whether voters now appreciate a larger dose of long-termism or if it is a ruse to deflect from something else.

Here, of course, I am referring to the federal opposition’s latest concerted attempt to present themselves as fiscally responsible and worthy of holding the government purse strings. Yet, they have not really done this by outlining detailed steps on how they seek to balance the budget and pare down the national debt. Instead they have done this by trying to show how Barisan Nasional (BN) has irresponsibly let national debt balloon to an estimated RM456 billion at the end of last year. This piece of statistic has given them cover to add much fiction to fact.

Along with increasing national debt and the sustained fiscal deficit, they have casually thrown in baseless allegations like the recent Bantuan Rakyat 1Malaysia income support programme being funded by a World Bank loan, Employees Provident Fund (EPF) monies being illegally used to provide subprime housing loans to individual borrowers and Felda mismanagement to the extent of its virtual bankruptcy.

Their line of attack is easy enough to fathom. It is not just fiscal profligacy they are pointing out, but a systemic failure rooted in massive leakages and corruption which they have, again baselessly, estimated at RM28 billion annually. The opposition are also feeding on the public’s anxiety at a time when we have seen more and more countries defaulting on their sovereign debt and having to rely on bailout packages from the outside world, often with harsh conditions attached.

Before the actual issue of the national debt is addressed, I just want to point out the sheer audacity of Pakatan Rakyat (PR) trying to turn fiscal responsibility into a defining issue for themselves. This is because notwithstanding some valid points that have been raised by them, I believe this to be a political ruse designed to make us forget that they are in fact the coalition of fiscal recklessness. All this focus on national debt recently has taken the spotlight away from a key criticism of their own policy platform - that they cannot afford to pay for the promises they have made.

If we go back to some of their specific promises, we quickly realise why they want to paint the present government as the guys who don’t know how to manage the people’s money because what they intend to do (should they implement each and every one of their promises) is nothing short of catastrophic. Take for instance their promise of a minimum household income of RM4,000 per month by the fifth year of coming into power. This would require a cash top up of almost RM94 billion for 3.8 million households nationwide.

Add that to all their other promises of nationalising highways, abolishing tolls, providing free wifi across the country, increased royalty payments to East Malaysia, etc and we are looking at a policy platform that will cost taxpayers almost RM200 billion resulting in debt rising to RM617 billion and the budget deficit swelling to more than 27% of GDP just in their first year of power. By the second year of their populist rule, Malaysia would effectively be bankrupt.

This is the proper context of their attempt to make national debt an issue during the election cycle. If their own policy platform was guided by realism and fiscal prudence, then their concern with the national debt would be credible. But it smacks of political disingenuity when the very people whose promises will bring the country to certain financial ruin begin to preach about fiscal discipline.

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