I was having a conversation about the budget with an Australian friend over dinner a couple of days ago. I have been scientifically trained since young and am unschooled in economics. My friend's economics major in university, however, came in handy when discussing the complexities of the budget.

I've always regarded democracy as an inherently flawed political system, its biggest flaw is that it is run as a popularity contest and that elections are the ultimate judgment of performance of politicians.

And one of the most direct consequence of such a system is irresponsible populist policies by politicians. After all, everyone loves goodies handed out by the government. Everyone loves subsidies, welfare, tax cuts, low cost housing, child care benefits, increased salaries, pensions, etc.

And it is all too easy for governments to give them out. It is the easiest short cut a government can take to get voted in again next term. As sad as it is, the large majority of the population does not care about development, so long as they have artificially cheap petrol.

However, it is still undeniable that democracy is the best political system humans can think of right now. After all, all other seemingly viable political systems have failed, and most rather disastrously.

What then can we do to at least make democracy a little better? To address its major flaws? Such a topic would be way beyond the scope of this letter, but at least we agreed on some things.

Both my friend and I agreed that there should be certain rules in place to stop rampant vote buying. A rule that says, it doesn't matter how many people voted for you, if you break that rule, you cannot run for elections next term.

A rule that can't be broken, and must always be followed. A rule that would help counter the effects of reckless spending, just to stay in power.

We both agreed that one of the most obvious of these rules would be to never ever, ever run a budget deficit. Why? Because 99.99 percent of the time they are bad. And they encourage governments to spend ridiculous amounts in subsidies, welfare, bonuses, etc, irresponsibly. With the thought that someone else would have to clean up the mess 10 years from now.

Yes, we both agreed that there are times when a budget deficit is justified (for example during times of great economic depression, increased government spending can help spur the economy on), but as said above, the vast majority of the time budget deficits are bad.

Running a deficit is like living on credit. You spend money you don't have now, and you eventually have to pay it back - with interest. Governments usually fund their deficit expense by issuing bonds in their currency. And if they accumulate too huge a debt in terms of bonds, they issue more currency.

Since with modern-day money, the issue of more currency doesn't actually cost the government anything (just print more), it'll be highly tempting to do so. When more currency enters the market, it severely decreases the value of the currency in foreign exchange markets and gives rise to inflation domestically.

I guess the point is that all debt will have to be paid and the future generation will have to deal with it.

By having a rule that specifies that governments cannot spend more than they earn will improve a country tremendously. For one, governments will have to be a lot more prudent with their spending. There's no "let's just spend more now and issue more currency when we are broke mentality".

Also, to fund vote buying activities (for example handing out subsidies), they can't borrow money, so they'll have to tax more. And since nobody likes to be taxed (I'm working in one of the highest taxing countries in the world, Australia, and trust me when I say tax is no fun), governments will look at ways to strike a balance between spending responsibly while minimising tax for the common folk.

The fact that the BN government has increased its budget deficit is surely a dangerous trend.

Most countries in the world right now face what is known as stagflation, where there is both the threat of high inflation and depression at the same time. In its simplest form, increasing government expenditure would end up fueling inflation which will eventually go out of control.

On the other hand, reducing government expenditure might send the economy deep into depression. After all, it is an extremely difficult thing to juggle, and it requires highly talented economists to get things right in such tricky situations.

I remain highly suspicious of Pakatan Rakyat's economic policies, which are even more populist than BN's and even more harmful to the health of the Malaysian economy. Giving people tax breaks now isn't going to stop inflation, it is just going to make it a lot worse.

After all, that's what inflation is: the vicious cycle of increasing price of goods and the increase in income.

Unless one (or better yet, both) breaks, the cycle will snowball.

Again, given the golden rule of never spending more than you earn, PR/BN’s many seemingly populist policies will see them kicked right out of the Parliament - just the way it should be.

The Malaysian economy is incredibly fragile because of bad economic management over the years. They've handed out so much subsidies and pretended for so long that inflation wasn't a problem. And when inflation really did become a problem, they were caught wrong footed.

Because the fundamentals were so bad, and Malaysia so very poor, there is absolutely no way they could have dealt with it properly. If they had not handed out so much subsidies, and had ran budget surpluses yearly, we would be in an a lot better shape. But they didn't.

And increasing our budget deficit now, in such difficult times just shows how they've not learnt their lesson. As said earlier, ten to twenty years from now, in yet another cycle of economic hardship, the government would be so incredibly poor (especially since we would have essentially thrown away all our petrol money by then) our economy will almost collapse.

So with all this said, what would I have considered a good budget? I don’t know, if I were PM, I would summon the world's greatest economical minds to help me. But fundamentally here's what I'll make sure happen (keeping in mind my limited knowledge in such matters).

1. Admit the mistakes of my government and accept responsibility of the economic mess that is Malaysia.

2. Rally the people to stand by me, reminding them that there is no easy way out (subsidising the price of petrol is the easiest way to hide a chronic problem, but the worst step you can take to solve it).

3. See to it that the poorest members of society are looked after.

4. Look at long term strategies to improve government efficiency and to eradicate corruption, thus setting the stage for increased foreign investment and a far better platform for moving the country forward.

5. Invest heavily in education. The only way any country (besides China and India) in this world is going to stand out in the 2st century is to be at the top of the knowledge chain, and we have to get there. Also, unlike infrastructure, education has an a lot less immediate impact on the economy and hence driving up the rate of inflation.

6. Look into other practical ways of paving the way for a world class Malaysia, including investing in technology infrastructure (the current broadband infrastructure in Malaysia is a national shame).

7. Spend very carefully, because as I said earlier, reckless spending will just lead to high inflation.

These are my humble opinions and while I am no expert, I really do believe in them. I really do hope that for the good of a nation, such golden rules must be put in place and maybe then, human kind can all progress further.