Many opinions regarding the budget
"The re-election of the government depends on how it handles the financial crisis, not the state's budget," said Guttorm Schjelerup at the national budget seminar in Oslo on October 9th.
17.10.2008 - Knut André Karlstad (translated by Jessica Hartenberger)
While State Secretary, Roger Schjerva presented the budget at NHH, several of the college's most profiled professors held a seminar for the press and academic environment at the Hotel Bristol in the capital. The ongoing financial crisis was a recurring theme.
Writing history
"We are currently writing economic history, which will be included in the textbooks of future generations," said Harald Magnus Andreassen from First Securities, who was the first to speak.
"We are seeing things now that we have not seen in our lifetime. I believe only a few could have predicted that it would end up being this dramatic. New rules and principles are written every day. Fiscal policy can be important, but it is not a discussion theme today. It can be an important theme in a year or two if all other things do not work," he claimed, and took some time to explain how the authorities can make a monetary policy.
"What we are seeing is a bank system that is collapsing and being taken care of by the authorities. Thus far, it is governmental interference that has kept the system from collapsing all together," he said.
OTHER BEHAVIOR. Per Kristian Foss compared the behavior of the finance crisis now to the Norwegian bank crisis in the 1990s. "The finance minister's behavior at that time was very different from now. Sigbjørn Johnsen went around to parties in parliament and received a broad consensus," he said.
Foto: Thomas Sivertsen
A shame to go to Oslo
There were few representatives from the political environment at the seminar, but one who was present and that participated in the debate that followed, was former minister of finance Per Kristian Foss. He praised the event:
"I have gone to these seminars many times and think they are useful. It is a tradition that should be maintained, but it is a shame that NHH has to go all the way to Oslo to do this," he said with a glint in his eyes.
Foss was in agreement with Schjelderup's analysis of the re-election possibilities of the government.
"I believe that the handling of the financial crisis is more important right now than the state's budget," he concluded.
LOW ASSESSMENT. "In 1996 the assessed value of housing composed approximately 30 percent of the market value, in 2004 it composed approximately 20 percent because of the price increase," said Guttorm Schjelderup at the state's budget seminar.
Foto: Thomas Sivertsen
Tax is important for growth
Professor Guttorm Schjeldrup discussed the tax implications of the national budget proposal.
"The strong tax increases which we might have expected have not come from this government," he said to the assembly.
"Real estate is still dramatically underestimated in comparison to market value. Notice that commercial property is taxed harder than private housing. There is fairly significant discrimination of commercial property. Why? Because the majority of voters do not own commercial real estate, it is the richest individuals who do," said Schjelderup, and stressed that favorable tax rules for housing have contributed to the fact that there is a boom in the housing market.
Schjederup also stressed that individuals with income below 600,000 receive an income tax break, and that new inheritance rules are good news for many taxpayers.
"The tax system is, in the long-run, the most important variable for promoting growth. The budget does not move with the fundamental principles of the previous tax reform," he concluded.
DON'T FORGET. "To remember a bit of history when it comes to oil prices, is a good idea," as said by Øystein Thøgersen.
Foto: Thomas Sivertsen
Conditional optimist
"What in the world has happened to the driver that has given the Norwegian economy unique growth in one period?" asked professor Øystein Thøgersen, and explained:
"A powerful blow to the bow, oil prices have gone down drastically. In the background, we have a unique period in the Norwegian economy from 2002 to 2007. One characteristic is a fantastic trade premium, because the strong global growth was driven by emerging markets. This particularly affects those countries that have intensive exports of raw goods, like Norway with oil."
Driving forces, both for the world economy and the Norwegian economy, have been these emerging markets, with China at the helm. According to Thøgersen, it does not stop with turbulence in financial markets.
"I make myself a conditional optimist on behalf of emerging markets, if we look a few weeks ahead we can expect a reasonable growth in these countries. There is something fundamentally robust in these economies, which can contribute to the fact that commodity prices, which are important for us, can stabilize," he said.
Underestimated housing bubble
The last NHH professor to speak was Victor D. Norman, who presented an interesting point initially:
"There has been a great deal of talk about the Nordic model, up until they discovered that Iceland is a Nordic country…"
According to Norman, our perception of the Nordic model has been that we stand on top of the mountain, and may not fully understand that we are not immune to what is happening internationally.
"There is a sensible frame for the budget. It has priorities on the expense side as it is easy to defend. Since we have had many years with tight public finances, it is not difficult to find good causes to spend on. But the national budget bears an impression that it does not include the latest forecasts," he said.
Norman pointed out that if the budget would contribute to lower interest rates, some of the expense items in the budget would be financed with tax increases. Furthermore, he dedicated some time to critiquing the government's efforts in the labor market, where the group between 40 and 60 years of age with disabilities has grown the most over the past three years.
"And so I think one underestimates the Norwegian housing bubble. We have a bubble that is almost of American proportions. But there are important differences between the United States and Norway: Norwegians are better at paying for their homes and holding on to them longer in comparison to the Americans. We can probably not expect the housing market to crack before the labor market slackens," said Norman.
POPULAR. There were not many available seats when NHH held the state's budget seminar.
Foto: Thomas Sivertsen
SOUGHT-AFTER. The press received a lot of good material out of the state's budget seminar.
Foto: Thomas Sivertsen
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