tax structure

Attila Mesterházy and Gordon Bajnai on the campaign trail

I noted yesterday that the election campaign has begun. I should have added that Fidesz has been campaigning from the very moment its government took office in May 2010. With election comes what Hungarians call “the spreading of the goodies,” at least temporarily making the electorate happy so they will support the government at the next election. This practice, which cuts across parties, has been largely responsible for Hungary’s chronic indebtedness and its large budgets deficits. Very often this largesse was financed with borrowed money.

Prime Minister Viktor Orbán swore that it would never happen under his watch that Hungary would borrow money to pay for social benefits. In fact, he was so serious about national indebtedness, which he considers the source of all the ills of the Hungarian economy, that it was written into the constitution that “the Central Budget … will have to ensure that the level of the state debt does not exceed half of the value of the gross domestic product of the previous calendar year.” Right now the national debt is larger than ever and only yesterday the government announced that Hungary had submitted a registration statement to the SEC for the issuance of up to $5 billion in debt securities. This will be the second such bond issue in US dollars this year. I wonder what Viktor Orbán will do if his government is unable to fulfill its constitutional duty with respect to the level of the national debt? It’s not that I fear for Orbán’s political well-being. This government is very inventive, so I’m sure they would come up with something to avoid the resignation of the government.

While the government has the means to distribute money and other perks, the opposition must be satisfied with promises. As has happened in Hungary time and again, these promises turn out to be empty. The 2010 promises of Fidesz, including one million new jobs in ten years, couldn’t be fulfilled. In fact, it was just announced that fewer people have jobs today than a year ago. The Balatonőszöd speech was partly about putting an end to this practice and stop deceiving the electorate. For a while the opposition parties seemed to have paid heed and refrained from falling back on their bad habits. Their politicians kept emphasizing the difficult economic situation and the long road ahead. But as the election gets closer they seem unable to resist the temptation.

So, let’s see who is promising what. MSZP held a huge meeting in Miskolc, a town that was once an MSZP stronghold. The crowd responded enthusiastically when Attila Mesterházy announced that if the MSZP, hand in hand with Együtt 2014-PM, wins the election “the winners will be the children, the youth, the women, the employees, the small- and medium size entrepreneurs, and the pensioners.” In brief, everybody.

Fair enough. Almost everybody would indeed win if Fidesz were sent back into opposition. But what specifically did Mesterházy promise? From September 2014 on students will receive a free education at Hungarian colleges and universities. A year ago the socialists were talking only about a tuition-free first year, after which tuition would be charged based on academic achievement and social needs. But now, it seems, there is no qualification. We know from past experience that the Hungarian budget cannot possibly afford the luxury of totally free higher education.

The socialists also plan to create a situation in which at least one person in each family is employed with a decent salary. I assume that he does not consider the current salary of workers employed in public works projects, which is not enough to keep body and soul together, decent. According to Mesterházy, the desired level of employment can be achieved by abandoning “this idiotic economic policy.”

He promised more money for education and promised to build gyms instead of football stadiums. They will spend more money on healthcare. Unemployment insurance, which was truncated by the Orbán government, will once again be available for nine months. The socialists will make sure that public transportation for people over the age of 65 will be “truly” free. Mesterházy admitted that to achieve all these things one must have robust economic development, but he added that “yes, we will achieve this too.” MSZP wants to modify the across-the-board lowering of utility prices, which currently threatens the industry with bankruptcy. The socialists suggest lowering prices only for those in need. MSZP would also change the tax system and get rid of the flat tax, which has done a lot of damage to the economy.

As you can see, there are plenty of expensive promises here. The healthcare system is in ruins, and it seems that the same is true of education. Even with higher taxation on the “rich,” as Mesterházy called those whose incomes are above average, healthcare and education cannot be salvaged. As currently configured, healthcare is a bottomless pit. Throwing more money into it is no remedy. It’s time for some fresh thinking.

Source: publisherdatabase.com

Source: publisherdatabase.com

Együtt 2014-PM also began its campaign, and it looks as if the party is concentrating, at least for the time being, on the under-35 generation. The party’s slogan is “Come home, stay home!” According to E14, the flight of young Hungarians is “one of the most serious problems today.” If they win the election they will open offices in each embassy and consulate where they would offer jobs in Hungary for those currently abroad. They would also assist those Hungarians who just finished their studies abroad and would like to return to Hungary. In addition, he promised that “he would guarantee a job or training that would lead to a decent job for all those under the age of 30 who hadn’t had a job in the last six months.”

Bajnai offered up a few numbers. He would spend at least 1% of the GDP on higher education and would again open the doors of colleges and universities to anyone who has the ability. Bajnai also promised 250,000 new jobs in four years. Well, that number is more modest than Orbán’s one million in ten years, but as we know governments cannot create jobs.

It’s not clear whether people actually believe these promises or whether, after all the unfulfilled and unfulfillable promises, they are jaded. Hungarians say they don’t believe politicians, but perhaps their belief is selective. Perhaps they believe promises from which they themselves will benefit and disregard the rest. Perhaps they believe some of the promises of their favorite candidate and none of the promises of the other candidates. Who knows? I doubt they would be honest with pollsters.

At any event, it’s tough to campaign with the message that people should prepare themselves for more lean years when opponents are promising a host of goodies in a “rising tide” economy. People want hope and change and a “yes we can” attitude.  (And a few more forints in their pockets one way or another.)  Disappointment that the government hasn’t delivered sets in only later.  Just ask Barack Obama.