Monday, September 24, 2007

Budget and spending follow-up: The Solbes-Castells pact on how much pork-barrel spending Catalonia is going to get means that Catalonia will receive €30 billion more in central government cash over the next six years. Catalan "infrastructure" spending will rise from €4.0 billion in 2007 to €5.9 billion in 2013.

La Vanguardia asked a bunch of powerful locals, business and union leaders, what the Generalitat ought to do with this windfall of cash. Their list of priorities was:

The commuter train network.
The freight train network. (Railroads handle only about 3% of goods transport in Catalonia; in the allegedly energy-wasting US, it's more than 40%.)
The high-speed passenger train from Barcelona to the French border.
Widening the road that runs Barcelona-Vic-Ripoll-French border.
Better access from the suburbs to Barcelona city.
Better access to the port of Barcelona.
The airport.
High-tension electric line connecting to the French grid.
"Neighborhood rehabilitation," whatever that is. Probably slum clearance. Or payoffs to "community leaders" for organizing workshops on empowering lesbian immigrant Sandinista single mothers.
Business schools.
Irrigation.
Maintenance of rural roads.

I'll agree that a lot of this seems pretty reasonable. Gotta maintain your infrastructure; if we're going to spend taxpayers' money on something, railroads and highways ought to be a priority, as they benefit nearly everybody. And since in the construction business you pretty much get what you pay for (unless too much of this cash goes into the pockets of the local party machines), it makes sense to spend a few bucks and get the job done right.

Spain's booming economy has led to a record budget surplus this year. Economics minister Pedro Solbes said it will reach €19 billion, much more than the expected €7 billion. They'd calculated that GDP growth would be 3.2% in 2007, and it will turn out to be about 3.8%, meaning that government revenues will be 5.8% higher than planned for. Solbes admitted the Econ Ministry intentionally underestimated its predictions for growth in order to avoid pressure from the Communists and ERC for increased spending last year; he said that increased spending would have caused more inflation.

(I hate giving Zap credit for anything, but this is the third consecutive budget surplus the Socialists have run. Zap's by no means a brilliant administrator, but he did have enough sense to pick Solbes and Fernandez Ordoñez as his economic policymakers. You can argue that the PSOE is able to run a surplus now because Aznar's administration cleaned up the economic mess Felipe Gonzalez left us in eleven years ago, and the PP does that with some justification. You can also argue that maybe Zap calls himself a socialist, but he hasn't nationalized anything or introduced a 30-hour workweek or tripled everyone's wages or done anything radical and stupid with the economy.)

So Solbes, Fernandez Ordoñez, and the Bank of Spain want to use the windfall cash to pay down the national debt (a total of €391 billion, 37.7% of Spain's yearly GDP, which is €1.2 trillion), which sounds like an excellent idea to me.

Zap wants to spend it, though; he calls it "fulfilling campaign promises." So he's going to spend nearly €5 billion of the surplus on this year's proclaimed new programs: €900 million to cover Dependents' Law requirements, €850 million for "infrastructure" in Andalusia, €825 million for the same in Catalonia (Andalusia and Catalonia are of course the two regions that give Zap the most votes), €1.5 billion for the newborn child payments, €785 million to subsidize young people's apartment rentals, and €45 million on dental care for children. And Zap is going to spend €1.1 billion more on "social policy."

The remaining €6 billion of the surplus will be transferred to the Social Security reserve fund; that's enough money to pay everybody's pension for seven months.

Fernandez Ordonez, the governor of the Bank of Spain, warns that this government spending boom cannot be sustained, because one of these years coming up there's going to be a recession. And, of course, the PP says that if we're running such a huge surplus, maybe we ought to cut income taxes.

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