All political decision-making is about choices between competing priorities. Who should benefit? Who should pay? Which services should be collectively funded and provided, and which privately?
Therefore, when the budget is announced I will not be overly occupied with the deficit or the debt track.
We are entering a second phase where choices lurk: Should the government spend to help stabilise business so that the recovery will trickle down to everyday families in jobs, or should cash go straight to families in the belief that spending will trickle up to businesses as we storm back to cafes, furniture stores and garden centres?
A 'bit of both' you say? Well you can do that too, but every dollar you spend on one end of the seesaw is one you don't spend on the other. Politics is about choices.
Therefore I would like to see two main pillars to the recovery: First, send money directly to the poorest and to working families. Trust us to spend it right. Second, pour money straight into projects that can get going immediately - within a month.
A massive conservation program could create tens of thousands of jobs for suddenly-jobless tourism, hospitality and retail staff. The government could pay local councils in every corner of the country to clear weeds and pests, build paths - they could get started in a matter of weeks and no one needs to leave town.
In the past, I have strongly supported infrastructure spending as both stimulus and nation-building. But planning and consenting delays mean capital intensive projects can't start fast enough. Speed to employ and pay wages should be the top priority.
House-building is the best stimulus. It can be started fast, employs more people than just about anything, and the outcome is, well, housing. Yes, Kiwibuild didn't work, but it was devised by people who thought the problem was people with Chinese-sounding names buying homes in Auckland.
What Kiwibuild should have been was a massive state house building program. We need one now. Housing developed and owned by local councils can be funded by central government at exceptionally low interest rates. Experienced non-government agencies, like Salvation Army and iwi authorities, can be quality partners as well. Provide the capital and get them to locate them, build them, house people.
To do that, the government will have to legislate for special development zones. In Wellington, for example, there are large tracts of land (one estimate is more than 40% of the city's area, not counting reserves). Along with spaces in Porirua and the Hutt, large urban redevelopment projects could be started within a couple of months, mixing housing, commercial, retail and education spaces like Canary Wharf in London and Barangaroo in Sydney.
I am less enthusiastic about using more public money for bailouts. Risk is part of business. Wage subsidies were right for the short term issue where businesses were torpedoed by government policy decisions - that was crucial. Rent subsidies are awkward because, if you own a retail business you are much more affected than if your business is owning property. A better outcome is to legislate rent reductions in proportion to declines in turnover and keep the taxpayer out of it. A restaurant that had to close would share the pain with the landlord.
But politics is choice, and mostly what businesses need are customers, not hand outs. This is why a rapid stimulus cheque for everyday households is my top priority.
It could be partly delivered through the winter electricity subsidy, which provides cash directly with fair-ish targeting, without distorting markets.
People without much money spend more of any stimulus. Researchers have studied
how households in the US spent their $1200 stimulus cheques. Individuals with less than $500 in their bank accounts spent almost half of their stimulus payment within ten days—44.5 cents per dollar received—while individuals with over $3000 in their accounts did not respond to the stimulus. The authors conclude that stimulus measures are most effective when targeted to households with 'low levels of liquidity.'
Finally, we need the budget to give an indication of the long term pathway to pay for it all.
There will need to be substantial changes to deal with debt. A tax system that is heavily skewed to personal income and consumption is already placing too much burden on working people.
We are going to have to move quickly to shift a significant part of the tax base from everyday incomes to capital. Not just capital gains, which simply treats one class of income the same as any other income, but capital itself. Especially where capital is locked up in land values.
We can use depreciation rules to deal with business needs for capital equipment like tractors and machinery. The real gap in the tax system is the treatment of land and share values. As they over-inflate, wage earners have to pay an ever greater share of tax.
Capital values will accelerate fast as the economy recovers. The budget this week needs to signal that some of that value will be captured in tax, just as wages are.
The budget is about choices, and this one more than ever needs to be a budget that stimulates the economy by helping everyday families.