The Japan Times on this year's budget

I want to review the Japan Times editorial on DPJ administration's first budge.

The editorial notes:

Harsh financial conditions have prevented the administration from keeping all the promises that the DPJ made during its campaign last summer. But the administration has succeeded, to some extent, in realizing the party's slogan of "shifting weight to people from concrete" and its aim of providing more funds for households, rather than for industry-linked organizations and large-scale public works projects.

Be this as it may, the promises were made in full knowledge of what was happening to the economy. So using the economy an excuse to break a promise doesn't exactly smack of sincerity.

The budget includes the monthly child allowance of ¥13,000 per child (no income cap on household eligibility) ... The child allowance is significant because it embodies the idea that society as a whole must support child-rearing.

This is a ludicrous and scary proposition. Yet the Japan Times just kind of blithely embraces it. Government are instituted or at least should be instituted to protect the rights of individuals. Governments should not be instituted to create a society that is viewed as good according to some centralized expert bureaucrat. Doing so puts the importance of government above that of the individual.

Note it's one thing to charitably give through free choice to some organization that helps parents in need. It's another to have a policy that redistributes income from one group of people (those who prefer not to have children) and gives it to another (those who prefer to have children.) The idea, of course, is to alter the behavior of the individual. In this case, mildly coerce people into having more children. That is not something the government should be doing.

Fund shortages have forced the administration to give up its campaign promise of reducing the rates of gasoline and other road-related taxes.

No, that's not true. When it's convenient, the government will churn out figures to show how losing money will actually generate more money. Free roads, more travel, more spending, a bigger GDP, more tax revenue. (I don't believe that, but when it's convenient politicians will argue this way.) The real problem here was the train companies got angry and exercised their clout in Nagatacho. (At least that's my guess.)

While the fiscal 2010 budget's general account reached the largest-ever at ¥92.299 trillion, and general expenditures to pay for policy measures amounted to ¥53.454 trillion, also an all-time high, the economic downturn is expected to reduce tax revenues to ¥37.39 trillion — down 18.9 percent from the initial fiscal 2009 budget and the lowest level since fiscal 1984. The government will have to issue bonds of ¥44.30 trillion, an increase of 33.1 percent and an all-time high. On an initial budget basis, new bond issuance will exceed tax revenues for the first time in the postwar years.

This is staggering. It's heart wrenching. Japan will surely suffer if it continues to follow such profligate policies. They are borrowing more money than they will raise in revenues this year! According to some, Japan's ratio of debt to GDP is the highest in the world. It's now higher than Zimbawe! The next highest OECD country with such a large ratio is Italy with about half as much.

How is Japan able to do this without going totally bankrupt? I'm not entirely sure and want to investigate this, but I take it that first of all Japan's total external debt (the amount of private and public debt owed to other countries) is actually relatively low. Also, the horrific postal savings (which the DPJ are not going to reform now) is a means whereby people's savings gets transfered effortlessly and painlessly into government debt.

My guess is this. Japanese citizens are not at all vigilant (at least not enough of them). While Japan has accumulated a lot of wealth, this wealth is held by individuals. They put it in savings institutions (like the post office), and these institutions then lend it to the government. What no one is paying enough attention to is that the government can't pay this money back ever, so a lot of wealth has been and will continue to be squandered. It's really criminal, if you think about it. The DPJ are not only continuing this policy, but putting on all thrusters.

Bloated deficit spending and bond issuance without discipline could cause long-term interest rates to rise and have a devastating impact on people's lives. The combined long-term outstanding debt of the central and local governments is likely to reach ¥862 trillion (some ¥6.75 million per Japanese) at the end of fiscal 2010, or 1.81 times Japan's gross domestic product.

Right. Whatever savings an individual has in Japan, they should subtract ¥6.75 million yen from it right now.

On the other hand, there is concern that the budget, despite its huge size, may not adequately stimulate the economy.

This is, of course, silly. This is the exact argument that caused the problem in the first place. Let prices come down, goods are less expensive, and people will buy more. Each individual will be wealthier, the economy will naturally recover. For almost two decades Japan has been trying to stimulate the economy, with no success, yet here is the Japan Times saying we need more of the same failed policy!

How is one to respond to this?