A Budget, as a friend of mine recently quipped; is just a promise that your future finances will be what you say they will be now. It’s just a promise. Does anyone think that the governments ledger will live up its future projections. Of course not. So why do we even entertain the thought that the budget matters, it only matters in notional terms not in real terms, as the PIIGS of Europe are finding out.
Anyone familiar with accountancy will understand exactly what I’m about to explain. Accountants call it accrued finances. It is the balancing of revenues and payments through out time. In a simplified manner, the government is paying itself, in the present, with future tax revenues. Revenues that are estimated with fantastically optimistic models i.e. resource boom. In reverse, liabilities are pushed from the present into the future. Immediately then, the budget balances. Unfortunately but predictably, next years budget will require ever more sever expenditure cuts and tax increases to balance. There certainly is no free lunch.
In some regards these accountancy methods are actually necessary for the normal operation of a business with client accountants and such. However the bureaucrats have brazenly stretched these methods to breaking point in their sheer ambitiousness. Resulting in a lack of financial reality, that is used to once again fool the public and the markets into accepting the government’s finances. This whole kabuki dance takes on a new tone of desperation as the government seduces the debt markets to sooth over its budget shortfall. Of course we all know how that ends, bond vigilantes and Central banks permitting. Remember, it was Greece who desired the Faustian financial machinations of Goldman Sachs as to how to hide/remove/deceive its on balance sheet debt, so as to be permitted into the EU. Many of the accountancy tricks engaged in by Enron the big Banks originated from government treasury departments. It is a case of the infection moving from public to private as bureaucrats seek private sector jobs.
So the Budget is pointless? Pointless to whom? The whole premise of the budget is for the government to show how much money it has extorted from you through its various and intricate taxes. Furthermore, to then play King-maker with the population rewarding friends and generally bribing people. You only need to read the Newspapers which provide graphic information spreads of the various segments of society that constitutes the winners and losers in the contest for the loot. It is your money the government is taking and then (maybe) gives back to you, but always on their terms! The whole spectacle’s premise echoes the bread and circuses of ages passed. It is manifestly decadent and corrupting.