YOURSAY ‘Does this means it’s okay to run a business and lose money all the time?’

Fiscal deficit not a bad thing, says Najib

Onyourtoes: PM Najib Razak, let me enlighten you with some basics in fiscal management which I think your officers at the Treasury have completely ignored.

Fiscal deficit is not a bad thing provided the deficit is cyclical and temporary, i.e. a few years of deficit in bad years (for example, recession years) is balanced by surplus in good years (for example when the economy has recovered and when growth is robust).

Malaysia's deficit, to me, has become structural and permanent. It has been going on for more than 15 years consecutively. Are you saying during the last 15 years there were no occasion for the government to attain surplus?

This could only happen when non-discretionary or locked-in expenditure has become too large. Typically, one of the causes is the size of government which has become too big vis-à-vis the size of the economy.

Other causes are wastages, unproductive spending and overpricing. Malaysia’s position is no difference from the United States with two big exceptions - US is a safe haven and the US dollar is a reserve currency while RM is not.

Sorry, Malaysia can’t behave like US. If we continue to do so, we will definitely and inevitably become Zimbabwe.

Magnus: Dear PM, is it better to run your personal finances with cash from your black bank account or from your red bank account?

If the black account, then you don't have to waste cash on paying overdraft interest or loan interest or credit card interest. The money saved from not paying any credit interest costs can then be used for more personal consumption (like overseas holidays and shoes for your spouse) or used for genuine long-term investments like a mortgage for buying a roof over your family's head.

So please explain to me again why deficit funding is good, Mr PM, when Malaysia does not need to have a red/deficit current account at all due to its immense wealth in natural resources? After all, economics is meant to be a rational subject, isn't it?

Just because other countries may be running deficit budgets is also no excuse for you or Malaysia to do the same now, is it?

Particularly when you can just as easily or even more easily run a surplus budget instead if you just excise all the unnecessary subsidy crap and stop employing people to do more mindless or pointless stuff that don't really add value to them, the nation or keep national finances healthy.

Debater: Just stop the corruption and free loading of the cronies. Corruption and pork barrel politics are the major causes of our deficit.

If the deficit are caused by spending in development it is fine, but unfortunately all these money landed up in the cronies’ and BN politicians' pockets.

Parvinder Kler: A deficit if used properly is perfectly fine. Issues arise when the deficit is persistent, or being used to fund projects that do not yield good returns.

The 'number' itself is not particularly exciting or even relevant. Malaysia's deficit is at about 4.4 percent (CIA factfile, 2013 est.), higher than average (-3.1 percent) but better than the ‘banana republics’ of Japan and the United Kingdom and similar to US, and worse than the ‘great’ economies of Azerbaijan, Bolivia and Djibouti.

Najib's statement is exactly right in that if a deficit does not hamper development, then what is the issue (especially if it boosts the economy)?

But in that, he opens the Pandora's Box. Has the deficit helped or hindered the country?

Progressive: Generally we are a better managed country but in danger. A deficit of 4.4 percent of GDP is a high figure. There is massive wastage - a bloated bureaucracy with spiraling civil service pensions, inflated crony government tenders, and prestige spending.

Two examples - why should we spend millions having a tourism office in Sweden when we can do it right from Kuala Lumpur? And why buy expensive SUVs instead of Protons?

The government is trying to overcome this by taxing us to the tune of six percent in GST (Goods and Services Tax) to increase its revenue. But at the same time, it seeks to hide their excesses, rather than curb them.

Spinnot: Borrowing money to invest in a viable business project is not a bad thing. But to borrow money for overseas holidays, visiting night clubs, buying expensive cars, gambling etc, would make you bankrupt.

Fourtan: Apparently, according to Najib’s logic the more you ‘hutang’ (owe), the richer you are. (I'm new to Kangkungnomics).

LifeFlier: Deficit is a fiscal tool (tool of public finance). It's effective and good only if the government is clean and transparent. The people of Malaysia would rightfully expect a quality service from every single sen invested in the public service payroll.

I believe many of us don't want our government to borrow further to feed the kangkung ministers, starting from our prime minister, defence/transport minister, home minister, DCA (Department of Civil Aviatioin) chief, IGP (inspector-general of police), all the Armed Forces chiefs, as seen by their performance in the MH370 debacle.

Fateh: "Fiscal deficit not a bad thing", but this country's deficit is caused by massive corruption, paying a few times higher than the actual price for government's goods and services.

Najib wants to continue fooling the rakyat, and I wonder when the rakyat will wake up from believing these lies.

Capo: It looks like the current government is in a hurry to let the country suffer the same fate as Greece.

The best thing we can do is to remove all our savings/financial instruments in the banks and subsist on a staple diet of home-grown kangkung and government-sponsored RM1 chickens.

James TCLow: Najib, being an economics graduate, you may have your case for a fiscal deficit scenario. In fact, world renowned economist JM Keynes would have supported you.

But are you going to take that as an excuse to scheme big 'grabs' like the Scorpene commission scandal? That's the rakyat's biggest nightmare.

SusahKes: Deficit is not a bad thing when you spend it for the right reasons or invest in worthwhile infrastructure. But it’s not so when we read about Putrajaya's profligacy in the successive auditor-general reports.

Not when we read of white elephants, crony bailouts, submarine commissions, collapsing stadium rooftops, ‘lawatan sambil belajar’(study) visits, illicit cross-border transfer of funds, bloated civil service and spouses making trips using government jets.

Roti Chanai: This is precisely what they said about Greece, Portugal and Spain. We know what happened to these countries and there are many others to follow.

ACR: There are many credible economists who opine that a deficit in itself is not bad.

Paul Krugman calls those against deficits as suffering from the deficit derangement syndrome. Dylan Mathews and Yale’s Robert Schiller too have expressed views in support of deficits.

Of course, Najib should know whether he has run the country's economy efficiently without wastage. I am sure most of us know the answer too.

Anonymous #47435535: Did he graduate with an economics degree from Nottingham University? Here is someone saying, it’s okay to run a business and lose money all the time?

Lim Chong Leong: ‘Najibodohnomics’ at work again. It is not a bad thing if we only borrow with some idea of how to repay the debt. Not just borrow more and more without an inkling of how to repay the debt or where the money is going to come from.

All Najib is concerned with is the feel-good factor for the few miserable years he is PM and spend and spend, especially to enrich the cronies.

Anonymous #44199885: And pray tell, where are we to find the money to pay for the debts and pensions once we run out of oil?

Clearwater: A fiscal deficit is actually a good thing (for you, that is) if you get to spend it but not pay for it.

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