You Can't Spend Your Way Out of the Crisis

Not every government in the world is expanding. This article is about the current administration in New Zealand:

http://online.wsj.com/article/SB123638162497057661.html

Some highlights of this article:

• "We don't tell New Zealanders we can stop the global recession, because we can't," says Prime Minister John Key.



• "We have been on a slippery slope," Mr. Key says, pointing to the country's slide to the bottom half of the Organization for Economic Cooperation and Development's per-capita GDP rankings. "So we need to lift those per-capita wages, and the only way to really do that is through productivity growth driving efficiency in the country." He talks at length about how to attract and retain talented workers. What does he think about populist arguments about the end of capitalism? "Nonsense!"



• Mr. Key's program focuses first on personal income tax cuts, which -- given that the new top rate, as of April 1, will be 38% -- are still high, especially when compared to Hong Kong and Singapore. "We just think it's good tax policy to lower and flatten your tax curve," he says. "People will move in labor markets and they look at their after-tax incomes."



• Cutting the corporate tax rate -- which is now 30% -- isn't as crucial just now as keeping liquidity flowing, Mr. Key argues. "A lot of [companies] won't pay tax if they don't make money," he reasons. "So they might be slightly less focused on corporate tax in the immediate future. Longer-term, they will be." Why? Corporate money is "mobile." "If you really are out of whack with the prevailing corporate tax rates, and there's been a global shift toward countries lowering their corporate tax rate, then you're not likely to attract capital, or you're likely to lose capital." Mr. Key and his coalition partner, the ACT Party -- Mr. Douglas's party -- want to eventually align personal, trust and company tax rates at 30%..

I now have New Zealand on my list of potential future residences