I noticed a couple of messages on the recent Budget 2024 announcement circulating in some of my group chats. The main points of these messages were essentially:
- We are setting aside billions of dollars for mid to longer term purposes such as the Majulah Package, National Enterprise Fund, National Productivity Fund.
- Why do we need to ‘lock away’ so much money, and yet still raise taxes? Why can’t we spend these funds first, and raise taxes later?
I thought that these comments are dangerously shortsighted, and felt the need to write about this. And this line of thought is rather similar to the classic logic espoused by NCMP Leong Mun Wai on several occasions, e.g. in his views on the use of the national reserves and his other proposed ‘Spend Now; Pay Later’ schemes such as his Affordable Homes scheme – where he advocates not factoring the land cost when buying HDB flats and only pay when you sell.
Such a logic – let’s call it LMW Economics for simplicity – will result in a country’s financial ruin. Spend Now; Pay Later. More like Spend Now; Your Children Pay Later. Actually, not even your children. You – Young Singaporeans in your 20s and 30s right now – will have to pay the price when you are closer to retirement age.
When the government sets aside monies, it is not simply ‘locking’ the money away. This is done to assure funding. Unlike many countries – such as the Americans – the Singapore government does not practice “unfunded mandates.” Which is to announce programmes of benefits that stretch into the future, but do not fund them.
An unfunded mandate is a statute or regulation that requires any entity to perform certain actions, with no money provided for fulfilling the requirements. This can be imposed on state or local government, as well as private individuals or organizations. The key distinction is that the statute or regulation is not accompanied by funding to fulfill the requirement.
– Wikipedia
The logic in LMW Economics would have us do the same. That we shouldn’t have trust funds or endowments, that we shouldn’t set aside total expected costs of longer-term projects such as costal protection against erosion etc. In other words, spend the money on something else right now if you don’t have the need for the full allocated money this year. Just take on more instalment plans! What could possibly go wrong?
But herein lines the problem: If you have not set aside the money in advance, you will have to raise even more taxes in future to pay for it. Failing which, your national reserves will gradually deplete. And as a small country, there is no one else to bail us out.
This is similar to wanting to spend more of Net Investment Returns Contribution (NIRC). We can do so, yes. But it will mean that you will have to make up the difference in future. If the NIRC’s contributions decline because it is not catching pace with GDP growth, that means Singaporeans will have to make it up in the form of taxes.
At the end of the day, we have to balance the books. And advocates of LMW Economics should spell out the trades off – if they object to 8.2 billion set aside for Majulah Package till the end, then how do they propose to fund it down the line? Make it clear as to what they are proposing, so Singaporeans know the alternatives.
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