LETTER: Shameful boosting of rich

It was stated in the 2024 medium-term budget policy statement (MTBPS) that “over the past 15 years public debt has accumulated, driven by a wide gap between spending and revenue. This led to increasing debt-service costs consuming resources that could have been used for priorities such as education, healthcare and infrastructure”.

The National Treasury is essentially saying that the money that should have gone to education, healthcare and infrastructure is instead going to wealthy members of society — after all, it is the wealthy who have government bonds through investment funds. The fortunate become more fortunate while the poor and their children suffer.

The government does not have to “issue debt” (sell bonds) to be able to spend. The issue of bonds acts rather as an interest rate maintenance strategy. The increases in the repo rate, and therefore the commercial bank borrowing rate, also act as a basic income grant for anyone who already has invested money, by increasing the return on that money.

The government can actually provide both the money for so-called debt service and the necessary expenditure for decent education and healthcare. The constraints are the availability of real resources — labour, skills and experience, as well as energy, technology and materials. Finance is not a limiting factor, except when eventually there may be inflationary pressures. Debt service costs don’t “consume” resources.

The MTBPS further reads that “the state is on track to achieve primary surpluses over the medium term”, as though this is a positive step. Yet surpluses extract money from the private sector, resulting in recessionary-type influences. We need greater spending, bigger deficits, as long as the right goods and services are available for purchase.

The economy is about things and people, and 12-million people are excluded from economic activity. It is an absolute shame.

Howard Pearce
Rondebosch

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