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First they give you oranges, then they squeeze them.


First they give you oranges, then they squeeze them.

In my article on Budget sweeteners entitled, “Why Accept Carrots When You Own the Farm”, I said that it was hardly surprising that the PM hinted at a good Budget in his CNY speech since the government had been running a surplus of around 10% of GDP this year. This was part of a fairly unbroken trend and that was before accounting for the surpluses of Temasek and GIC or the profits from land sales
The PM’s hints at a generous budget were closely followed by Deputy Prime Minister Teo Chee Hean’s grim warning to the people, “to be realistic in their expectations of Budget goodies as, even in good years, it is important for the Government to save in readiness for future uncertainties”?*
Are the Prime Minister and The Deputy Prime Minister singing from different hymn sheets? Or is it just a way of managing expectations so that people are taken aback with the government’s generosity later on? The right hand comes out and talks of giveaways during traditional Hangbao time. Then the left hand comes out and talks about uncertainty, the need to tighten belts and expect the worst.
Of course the incumbents may simply have given up on any attempt to win the electorate over with giveaways. Not only because I have suggested it would have been possible to cut taxes or increase spending by as much as $10,000 per Singaporean man woman and child in the last budget without running a deficit. But also because every time they offer to give us our money we respond that it is our money, thank you! Having realised that their attempt to demonstrate how generous the government is has been foiled by my exposure of the statistics and the new awareness, they may have decided that talk about Prudence will play better.
In any case another article in the ST Online entitled “Overcoming inequality and the income gap”** ironically highlights how little is done to help the lower income groups despite the massive surpluses. In the case cited a mother hopes for help with her three daughters’ education expenses. While the government would no doubt claim that the fees are nominal, I would beg to differ. To a family on or below the poverty line these fees probably deter them at the margin from investing in as much education as they otherwise would if it were completely free.
I have visited many of these families myself doing my rounds during walkabout. My economic beliefs are further supported  by the evidence of my own eyes   I have made it one of the central planks of the Reform Party’s education policy to make education completely free up to secondary level. It strips these families of their dignity to suggest that in our economy they should rely on charity or the philanthropy of strangers. Especially when that charity, in the case of the ST pocket money fund, gains its revenue from being a State owned monopoly.

Investment in education has been demonstrated in countless economic studies to generate a high social rate of return. Most, if not all, countries that have reached our level of development provide free education up to secondary level. It is the founding rock of an advanced and civilised Nation.

Yet our government considers it more important to hold down productive spending on our citizens to generate an extra few billion in surplus. It should be a truism that each succeeding generation is richer than the one preceding it It is hard to see the justification for saving such a high proportion of GDP when the returns would be higher from investing it at home.

I for one am confident that the rate of return from investing our budget on our people will far exceed what we can hope to earn on the surplus.

*http://www.straitstimes.com/News/Home/Story/STIStory_634430.html
**http://www.straitstimes.com/BreakingNews/Singapore/Story/STIStory_634589.html

8 Comments »

  1. I understand that our schools r being sponsored by the totalisation board. That board gets its monies from gambling.
    Tks for sharing these insights.
    I wonder… Back in the 80s, how many big Mac a median salary could purchase compared to now? How many big macs do pp w median salaried in developed countries purchase?

    Probably with median income, a person who purchase his hdb at 30years old may never meet the minimal sum after paying one’s hdb loan at 2.6% for 30yrs

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  2. I found it amusing that the newspapers came out with surveys about how the majority of people were in favor of the Budget less than 24 hours after it was announced.

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  3. Hi KJ, I would just wanna ask what’s the pros & cons of providing free education & how is the government gonna finance this initiative? As far as I know, nothing is free. Govt do not generate income; Govt collect taxes fm the people to form its revenue. Free education may simply means higher taxes in the future. Moreover, I doubt that one would really ‘value’ something if it comes free & cheap. While your intent of providing free education is well & good, I’m rather suspicious of any blind spots that could, on the contrary, generate other problems.

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  4. It IS strange that it seems like its the “Government”‘s habit to give separate “climate report” on most important issues.

    First they will say “Good news”, followed by “disclaimers”..

    I always feel that it is some sort of smart mind games that they are playing with Singaporeans.

    Like what i have learned in engineering class, to break a piece of metal, u don’t need a saw, just keep bending it in opposite direction and eventually the material stress would break it!

    So i guess if Singaporean are “metal”, some would have already been broken without knowing!!

    On the other hand, the PAP news reports always seems to carry some kind of sick humor.. like in the movie “The Devil’s Advocate” – Look but don’t touch. Touch, but don’t taste. Taste, don’t swallow.

    😐 :S

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  5. Dear Mr Jeyaretnam,

    Thank you for your articles.

    Through yourself and others, I hope Singapore can get out of the dangerous path which she finds herself in.

    I hope you as a trained economist can find flaws in my own amateur theory as how
    Singapore could have prevented a lot of the problems she is now facing if the government had not mishandled the CPF and the HDB.

    Present Day Problems:

    1. Low birth rate
    2. Lack of entrepreneurship
    3. Lack of funds for retirement

    If HDB prices were kept low from the start (as they are all controlled by the government), the citizens would not have to put most of their salary money servicing the huge home loan. CPF should have just focussed only on its original mission – money for retirement. With more disposable income, citizens can spend more on local businesses, or even start businesses. More cash freed up can go into raising children. Since we have no welfare system, this will allow each citizen to set up his own fund. HDB is an asset based on artificial values which is actually robbing from future generations. The asset enhancement is an illusion, as other HDB properties would also have risen in price. Plus, we are not owners of our flats. What happens when the lease expires?

    Now we have a CPF that looks more like a Ponzi scheme. There is no-one that can withdraw all the money in their account except those who take up citizenship in another country. The rest of us will be forced to take up an annuity.

    Like

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