I'm with Matt on this one ...

Over at the TVHE blog Matt Nolan writes,

Serious, what in the hell. I am sick of reports that talk about these massive benefits of government spending without actually looking at them in context with, you know, opportunity cost.

I was annoyed with the way a PWC report was used, and now this release on a Covec report is similarly dodgey. The report is probably fine (although I have not had the good fortune of reading it), and probably defines exactly what they are looking at and why – I have faith in NZ economists. But this:

Williams said the report showed that the Government’s contribution to a rescue package should be at least 25 per cent because the tax receipts would make it cost-neutral.

But wait, isn't every dollar we spend on leaky home repair a dollar we don't spend on something else? The dollar for repairs has to come from somewhere, and that somewhere will lose a dollar in spending and thus the government loses gst.

Matt goes on to say,

The only reason to get involved is real externalities, doing a partial eqm analysis and saying the tax take rises involves ignoring where the hell the tax comes from and the opportunity cost. Treasury is right when they say this is neutral.

Well said that man, Williams is a b/s artist.