TL;DR – Singapore’s too small and vulnerable to suffer national emergencies. We need our national budgets to be strategic long-term financial plans.
There’s an emergency brewing in USA. It’s an emergency that’s the making of a single person – Donald Trump. In order to deliver his election promise of building his wall while averting another government shutdown, Donald Trump has stated that he would declare a national emergency to get additional billions of dollars of funding to build his wall.
In total, Trump wants to spend USD8 billion to build his wall. That’s about 10% of Singapore’s Budget last year.
USA’s real emergency – its deficit
What’s worse, this expenditure comes at a time when USA posted huge budget deficit of USD14 billion in December. Yes, that’s right, in a single month, USA’s deficit is about 18% of Singapore’s budget in 2018. Our total expenditure was SGD80 billion in 2018.
These deficits add up. And they must be paid for somehow.
In 2017, the 6.6% of USA government spending goes towards paying the interest on debt. By 2020, that figure will be close to 10%.
That means that by 2020, the USA government will spend more on paying interests on its debt that it does on kids, including education, food stamps and aid to families. If anything, that’s the real emergency that USA should be worried about.
USA can get away with doing that because they are the world’s largest economy and most powerful military.
But a small country like Singapore can’t.
Imagine if the Singapore government has to include billions of dollars in its annual budget to pay the interest on our debts… We would have so much less to fund all the important social programmes and invest in the infrastructure for the future.
Thankfully the situation in Singapore’s quite different
Thankfully, we aren’t in that position. In fact, not only does our government not need to budget for spending billions to pay interest on debts, returns from its investments contribute a significant proportion (17% in 2017) of its annual revenue.
The contribution to the Singapore government’s annual revenue from the returns of investments is more than enough to fund 1.5 times our expenditure on health.
How did we end up in such a happy situation?
Because we won Toto.
Or rather, we, this generation, have been lucky to have had past terms of government who earned way more than they spent so that they can save for future generations of Singaporeans. Those terms of government then invested the savings. Rules were also put in place to make sure that any term of government can only dig into reserves built by past terms of government under very exceptional circumstances.
Wait. What’s a term of government?
A term of government lasts from one general election to another, so we’re looking at 4- to 5-year periods typically.
Except in very special situations, each term of government can only spend what it earns. The Singapore system ensures that a current term of goverent does not beggar future governments and generations.
It the nation spends less than what it earns, then that’s a budget surplus and the money will go into the past reserves the moment the term ends. A portion of the returns from the investments of the past reserves then becomes the revenue of future terms of government.
So this current term of government started at the end of the last general election in 2015 and will last till the next general election (whenever it will be). So there were already three national budgets from 2016 to 2018, with many packages and measures rolled out to help different pockets of the population.
At this juncture, it’s perhaps worth reminding all that the Government is unlikely to address the needs of everyone in a single budget. But over a term of government that spans across a few years, it is likely that the Government would have implemented some measures to positively impact the majority of the population.
For 2019, Minister for Finance Heng Swee Keat will announce the budget statement come 18th Feb, Monday, at 3:30pm.
And even as the expenditure of this term of government has increased significantly compared to the past term, it still maintains the same philosophy – earn more than it spends so that there’s more left for Singaporeans of the future. This is to ensure that the returns of investments continue to grow so that future terms of government has more money to spend to meet the increasing needs.
Some people will disagree with this philosophy. Why don’t we spend more today? Why bother leaving more for the future?
We should keep it up
As someone who’s about to become a father for the first time, I fully support the philosophy. Personally, my wife and I also want to spend less than what we earn so that we can save and invest, grow our wealth and make sure we have money to spend in the future when we retire. More importantly, we want to ensure that we can leave something behind for our children.
And we definitely want the government to do the same with its budget, so that the terms of government when my child is an adult will continue to be able to use returns from investments to fund their budget rather than pay interest on their debts.
So… while I do agree that there is room to increase our social spending, I also think we should continue to build our reserves so that future terms of government can have more from the returns of investments of our past reserves to spend. Is that too much to ask? Is that an impossible task?
Whoever can do it will have my vote in the next general election.