Source: YouTube video screengrab.

How much fiscal sustainability is enough?

by Chris Kuan

Fiscal sustainability key to achieving country’s goals: Heng Swee Keat” reports Today Online, we should expect more of this one-sided narrative given that taxes will go up, its only a matter of time.

Minister of Finance, Mr Heng Swee Keat talks about that loaded sovereign finance term – fiscal sustainability. Same old same old of having the firepower to deal with an attack on the Singapore dollar, passing wealth to the next generation, the usual tired clichés of government narrative plus a new one, risks to traditional revenue sources from disruptions and changing business models.

Repeat – fiscal sustainability can be achieved without having reserves, without having to generate budget surpluses, without having to be stingy in social spending.

Lo and behold, it can even be achieved with budget deficits so long as these are not excessive. And once more, Singapore has fiscal space equal to 190% of Gross Domestic Product (GDP) according the Moody research used by the International Monetary Fund (IMF), 10th highest in the world without taking reserves into consideration.

This is no normal fiscal sustainability the government has always implemented – it is an extreme version that leads it to consider first, foremost and only tax hikes rather than seeking alternative means and asking crucial questions of sovereign finance – how much reserve is enough, when do the nation need to slow down the reserves accumulation.

Make no mistake, fiscal sustainability have costs, predominantly social ones. The more extreme , the higher the costs. High income inequality even after tax and social transfers, high individual portion of healthcare costs, low retirement adequacy, high “public housing” prices.

It is the cause of the reluctance to provide unemployment benefits in face of greater volatility in the global economy that leads to Growth Maximisation that generate lots of jobs, never mind what kind, never mind it also require the influx of foreign workers and never mind the dampening effect on wages. Now the long run consequences have caught up.

All of this begs many questions. E.g. why should there be an attack on the Singapore dollar that so much reserves are required to defend if the government did not messed almightily to begin with? How much protection does the government needs or how high the over-insurance must be in order to face risks?

Think of these questions and one wonders if the relentless accumulation of reserves and tax hikes is at minimum to make life easy for the government and at the worse to bail itself out of its mistakes.

After all, control of the sovereign finances also provide the means to “auction for votes” – well if the Pioneer Generation Package that is limited to a certain age group leaving out other age groups isn’t an auction for votes, I don’t know what is.

The nation is drowning with fiscal sustainability at all levels from town councils to state agencies to the government while needs are left unfunded and the govie can only think about tax hikes. In the meantime, it hides behind the cloak of secrecy and demands trust.