Ahead of 'Prince's Day' (Prinsjesdag), the start of the new parliamentary year on which Finance Minister Wopke Hoekstra and other government ministers will unveil the budget in The Hague on Tuesday after a speech by King Willem-Alexander on the state of the nation and cabinet plans for the coming year, Professor Bas Jacobs (Public Economics) and Professor Casper de Vries (Witteveen Chair of Monetary Economics) of Erasmus School of Economics take part in a panel discussion on the Dutch radio station BNR Nieuwsradio on Monday 17 September 2018. Together with Menno Middeldorp (Chief Netherlands Economist of Rabobank) Jacobs and De Vries discuss the main (expected) features of the government policy for the coming parliamentary session.
The budget that will be presented tomorrow is stimulating, according to Professor Bas Jacobs: the taxes are going down and the government is going to spend more. Bas Jacobs believes that this is the engine of the budget, and many bilions are involved. Because the economy is still in a boom, this budget can be called procyclical. However, Professor Jacobs believes that this budget will be a blessing in disguise, because there are signs that a contraction of the business cycle will follow next year.
If the economy would not have been in a boom the budget would tell a completely different story. Then, there would have been a budget deficit, which would be close to the European maximum level. According to Professor Caper de Vries however, the government is not making sufficient use of this boom and the resulting space it creates for government spending. According to Caper de Vries, the government should address the problems concerning pensions, which involves around 60 billion euros. Professor de Vries says that the Minister of Finance should increase the government debt with this amount. That is not problematic, it will be even a lower increase in debt than we have witnessed as a result of the crisis. Over the coming 10 year, the government can slowly earn this amount back from pension funds using taxes. There is now space to do such a thing and as the interest rate is at its lowest point, it is also cheap to do so. However, Professor de Vries does not believe we will see this increase in government debt back in the budget tomorrow.
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Listen to the entire panel discussion on BNR Nieuwsradio, d.d. 17 September 2018.