Thursday, October 18, 2007

The Dispatch, The Coalition And The Economy

Things change.

I have been one of the hardest of the hardcore advocates of the position that the LDP dare not hold an election before 2009. The coalition supermajority won under Koizumi Jun'ichirō's leadership in September 2005 was too huge and aberrant to test. No policy fight could possibly be worth the inevitable drop in the number of seats held by the LDP and the loss of the ability to override the House of Councillors.

Now I am not so sure. The final days of the usefulness of the coalition's supermajority may be drawing near.

For Abe Shinzō, the supermajority in the House of Representatives and the majority in the House of Councillors were crucial to his revolution. Everything he did over his year in power, even the mishandling of gaffes and scandal, was done with one eye on limiting the effect of any policy or action had on the coalition majority in the House of Councillors. The constant focus on defensive moves and long-term strategic plans, to the detriment of day-to-day tactics, was the origin of it all—the covering up of errors and bad news; the shrugging at stupid statements by ministers; the betrayal of the conservative cause by avoiding Yasukuni and farming out the conservative social program to committees; the maniacal management of the legislative calendar (execution, execution, execution) without a thought about appearances.

Everything was done in the hopes that the coalition would retain its power in House of Councillors. Once the coalition got past the House of Councillors election, the stage would be set for the commencement of the full conservative revolutionary program.

While the coalition's controlling more than 2/3 of the seats in the House of Representatives was a sledgehammer before, it is becoming more of as a burden. As both the Japan Observer and Okumura Jun have admirably argued, the reduction of the mandate of the renewal of the MSDF dispatch to a single year has been done in order to placate the youth and women's divisions in the Komeitō.

[The cutting down of the extension also probably represents an attempt to peel away DPJ votes from party members distressed by DPJ leader Ozawa Ichiro's increasingly unpopular intransigence over the low risk Indian Ocean refueling operations. Forgotten in the shuffle sometimes is the inconvenient truth that the Democrats are six votes short of a majority in the House of Councillors. Ozawa has to appeal to the radicalism of the Socialists and the Communists in order win their votes—hence his lack of flexibility on the Indian Ocean dispatch.]

This concession, however, makes not the least bit of sense. Abbreviating the renewal's tenure guarantees that the country will be witnessing exactly the same debate in a year's time. Barring death, the same actors will be reprising the same roles. Given the bloodletting that has gone on over the extension and given the possession of the supermajority, the LDP should be insisting on the full 2 year maximum (Damn about the threatened censure motion in the House of Councillors!) in order to put the subject on the back burner for both the LDP's and the Komeitō’s sakes.

For a party that failed to deliver its promised number of votes—its supposedly rock solid support base being its only virtue—in the July elections, the Komeitō is making a lot of intemperate demands. The request to delay the onset of the higher out of pocket payments for medical care for seniors has no defense. At least in the notorious delay in application of maximum amounts of deposits protected by deposit insurance, the so-called "payoff" delay, the rationale offered was that neither the public nor the banks had prepared themselves for the new system: that too many banks were one the verge of failure and too many people were in danger of having their savings wiped out.

The delay in implementing the payments increase, however, is pandering to voters 70 and older. Nothing more, nothing less.

The cost to the taxpayer--about a trillion 150 billion yen per year for every year of the delay.

Within the LDP itself, there is no consensus on economic policy. The government may be able to pass a budget without the benefit of an economic plan in February by relying on the economic guidelines set down under the Abe Cabinet. However, once past March, the coalition and the government will have to come to some kind of understanding about what kind of economy Japan should have.

The mainline factions of the LDP are of two, irreconcilable minds. The key taxation and spending policy posts in the LDP -- the chairman of the Policy Research Council (seichokaichō), the chairman of the LDP Fiscal Reform Study Group (zaiseikaikaku kenkyukai kaichō) and the Research Commission on the Tax System (zeiseichosakai) are all in the hands of notorious hardhearted and hard-of-hearing fiscal hawks (Tanigaki Sadakazu, Yosano Kaoru and Tsushima Yuji, respectively). Each one of them will be beating the drum of raising revenues by whatever means possible--and holding a lid on spending at least at the present levels--all to keep the government on course for a budget surplus starting in 2011.

[Prime Minister Fukuda through word and deed has shown an affection for the arguments of the fiscal hawks.]

On the other side are ranged the fiscal profligates and tax receipts fiddlers.

Known around the world are the local vocal yokels demanding greater spending on public works in the districts with poorly performing economies.

[Prophetically, this week's Shūkan Gendai has a stunning photo pictorial series of some truly gargantuan and embarrassing wastes of taxpayer yen. Expect demands for more of the same.]

Less well appreciated are the cabal in the LDP trying to reverse to rural Japan's increasing economic irrelevance through all kinds of tax diddles. Like Dracula, the furusato nozei plan allowing individuals to earmark 10% of their the residence tax (jūminzei) to a municipality of their choice (an idea that sort of ignores the gist of representative government--but who's paying attention, right?) just keeps coming back. There are other plans to mess with corporate taxes (hōjinzei) in an attempt to funnel money into depressed districts.

Now duing the Koizumi era, pro-growth heavies like Nakagawa Hidenao and Takenaka Heizō triangulated between the fiscal hawks and fiscal profligates, telling them both to go heck. This group, numerically always tiny, has failed to hold on to any major post in the new administration and party lineup. Ota Hiroko keeps doing her best for the team but she is alone.

Now if the membership of the LDP cannot agree on a single issue of economic policy within itself, meaning that it has no program, what is the point of appeasing the Komeitō? If you have no legislation on tap that must pass no matter what, why denigrate yourself in order to secure an unshakeable ultimate majority?

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