Don Brash: Hardline Tea Party tactics a lesson for our politicians

Don Brash. Photo / Dean Purcell

There are some powerful lessons for New Zealand from the debt debacle in the United States. The Tea Party Republicans, by threatening to cause the US to default on its debt, have turned a regular vote on the debt limit into a weapon of mass destruction.

Raising the debt limit is just a routine vote to allow the Administration to pay for programmes that Congress has approved.

The level was raised 18 times under President Ronald Reagan. What is different this time is that the Republican Party, which controls only one branch of the legislature, decided to use the threat of default to force the Senate and the President to adopt Tea Party policies.

The threat worked because the Democrats believed that the Republicans were willing to "burn the house down", but the spectacle of the government of the largest economy on Earth standing on the brink of a default - and having no credible way of solving its fiscal problems in the longer term - convinced Standard & Poor's that the US was no longer a AAA-rated borrower.

So this couldn't happen here? I'm not so sure. MMP means we too have a system where voters can create a deeply divided legislature. No political party has received half the vote since MMP began in 1996. The last time the National Party got more than half the popular vote was in 1951; the last time the Labour Party got more than half was in 1946.

And, of course, both of those elections were held under first past the post (FPP). Under MMP, the larger parties almost inevitably require support from third parties to form a government.

Third parties have been tempted to exercise power beyond their mandate. Winston Peters has twice played this tail-twisting-the-dog game. There was no way he had a mandate to demand to be Treasurer in 1996, nor Foreign Minister in 2005, especially when he claimed before that election that he had no interest in the baubles of office.

The electorate has punished third parties for this over-reaching. Whether the lessons have been learnt is doubtful. Green Party co-leader Russel Norman says he wants to be Finance Minister in a future Labour/Green government. The electorate's fear of a capital gains tax is increased because the Greens have stated they will push for the rate to increase to 39 per cent.

Hone Harawira split his party because he believed the Maori Party should demand more policy concessions. It is worrying that his electorate has endorsed his hard-line approach. Should his Mana Party be successful at the general election, they could hold a future Labour/Green government to ransom.

The left keeps claiming Act will hold National to ransom. My reply is: "Where is the evidence?" Act has stuck strictly to its coalition agreement with National. One of my first actions on being elected leader of Act was to meet the Prime Minister to assure him there would be no change in that agreement.

The Tea Party is right that US debt is out of control but that does not entitle Congress to threaten to force a default that would have had a devastating effect on the world economy.

We in Act have always said that the stability of the country is of paramount importance. In a move the commentators appear not to have understood, Act and National have decided to take this a stage further this election. Act has decided to announce before the election that it will give confidence and supply agreement to a National government under John Key.

Third parties usually indicate before the election whom they are likely to support in coalition talks. But to the best of my knowledge, only Act has pledged to give confidence and supply to another party ahead of the election.

Of course Act will still push hard for lower taxes, less red tape, reduced government spending, school choice, welfare reform, one law for all, safer communities, and an end to the emissions trading scheme.

Every election year the economy slows. It is not just businesses that are reluctant to invest until they know the outcome but consumers, too, are often reluctant to buy items such as washing machines until they know who will be in government. With all the turbulence in the world economy, we just cannot afford that uncertainty this year.

The polling has said John Banks is going to win Epsom. Perhaps Act would be stronger if we won Epsom with no accommodation with National. But an accommodation in Epsom and a pledge by Act to seek only the list vote in other electorates strengthens the centre right and creates certainty.

It is better to provide voters with a sure way to elect a stable government by coming to an open agreement with National in Epsom, even if it slightly weakens Act's ability to drive a hard bargain in post-election talks.

We have a duty to the country to ensure stability. The Tea Party is giving us a demonstration of what not to do. Our Government cannot keep on borrowing $300 million a week. We need lower taxes to encourage investment, growth and jobs. But our task is to win our case at the ballot box - not through post-election blackmail.

As Governor of the Reserve Bank, I was always aware of the importance of stability. In the last few weeks, businesses all over the US have put away their chequebooks as events in Washington make people scared to invest, hire and buy. The damage to the American economy from the debt debacle may cost the government more in lost revenue than the spending savings the Republicans achieved.

It is a lesson to all political parties. Right now, providing confidence may be the most important thing Act can do.

Don Brash is leader of Act New Zealand.