AUSTERITY AND OTHER COMEDY ROUTINES

Jamaica’s Budget has been widely described, including by Finance Minister (MOF) Peter Phillips as an “Austerity Budget”.

Seriously?  Ignoring economic mumbo-jumbo used by “expert” analysts to regularly pollute the discussion, this is what’s real.  This budget’s recurrent expenditure estimates total $375 billion (7% above 2011/12).  Annual inflation for 2011 was 6%.  Where’s the “austerity”?

Loud and persistent noises about horrific new taxes have misled many that these are indicators of an “austerity budget”.  Instead, it indicates a Government too weak-kneed to make the required expenditure cuts; too lazy to create innovative revenue raising schemes; and too obstinate to admit that increasing taxes on an already overtaxed minority is an impossible dream.

No public sector jobs have been cut as we continue to propagate the myth that this overstaffed and underperforming public service is necessary.  Cabinet has been increased.  Nobody wants to help stretch GOJ’s revenue dollar.  Instead, our leaders drive to Parliament in new, tax-waiver acquired luxury vehicles from whence they pontificate to us about sacrifices and covenants.

So, an austerity budget was alleged but, instead, we were subjected to a creative spin-off of the infamous “good cop/bad cop” routine.  Our so-called Budget Debate looked and sounded more like an unpublished skit from that brilliant 1960s/70s satirical revue “Eight O’Clock Jamaica Time” entitled “Good cop/Bad cop/Mad cop”.  Contributions to “Eight O’Clock” came from several writers/composers (e.g. Norman Rae, Peter Ashbourne, Dr Jimmy Barton) but the overwhelming majority of the scripts and lyrics were the handiwork of the great Tony Gambrill whose language skills and wit remain second to none. This Budget Debate parody could easily have been written by Gambrill.  The lead characters were poignantly played by aspiring Tony Award nominees Peter (as “Bad Cop”); Portia (as “Good Cop”) and Young Andrew (as “Mad Cop”):

Bad Cop:   GCT on electricity was 10%, with a threshold of 200 kWh for residential customers.  The threshold is increased to 300kWh for residential customers and the rate to 16½%.  Promise made.  Promise kept.

Good Cop: Mr. Speaker, we promised to relieve the burden of GCT on electricity, particularly for the poor….The Minister……….presented a set of measures. Since then, there have been numerous requests for us to extend these benefits to all householders.

We have heard the cries of the people. We have listened and feel the pain….. As a responsive government,…….., the decision has been taken to completely remove GCT on electricity bills for all residential customers.

Mad Cop:   God save our gracious Queen
Long live our noble Queen
God save the Queen!

Bad Cop:   Our relationship with the IMF stands at the centre of our economic recovery programme… Our survival now requires we change our approach…  The best gift this Parliament can give Jamaica…is a NEW AND BINDING COVENANT….to achieve in the first instance fiscal consolidation and debt sustainability.

Good Cop: We must move people from welfare to wellbeing and from wellbeing to wealth creation. We must provide our people opportunities for training, certification and jobs consistent with the dignity of our citizens. The macro-economic framework of this government is designed to stimulate local investment and unleash the entrepreneurial spirit of our people while expanding and facilitating access to capital for small and micro enterprises.

Mad Cop:   Send her victorious
Happy and glorious
Long to reign over us
God save the Queen

Bad Cop:   Is it possible to adopt a comprehensive set of policies to put the debt path on a downward trajectory and to break the cycle of low growth? Yes, but only through the exercise of fiscal responsibility……  As I have stated Mr. Speaker, tight fiscal management is for Jamaica a necessity. There is no other choice available to us…… It’s therefore, necessary in this special period of economic challenge which we face….to “Put our Public Debt on a clear and decisive downward trajectory.” This means running higher primary balances and lower fiscal deficits.

Good Cop:   In this Fiscal Year, Phase II of the JEEP will be rolled out.

…in Phase II…., there’ll be projects from the Agriculture Ministry, HEART NTA, the National Works Agency, Labour Ministry, Housing Ministry and the National Housing Trust.  The total amount which will be spent during this fiscal year will be just over $6 Billion….

We’re keeping our commitment to move our people from welfare to well-being and from well-being to wealth creation……

Government has agreed to grant the NHT tax free-status….for the next two years. The NHT will pass on this benefit thereby enabling more affordable housing for that category of beneficiaries…..

There’s more, Mr. Speaker…..

• NHT Contributors who qualify for loans at 3% interest will now only repay at 1%

• Contributors who qualify for loans at 5% will now pay only 3%.

Hotel workers [GR: Why only “hotel” workers?] who earn $10,000 per week or less and who apply for an NHT mortgage during the next three years, will receive a 1% reduction.

There’s still more:

The 1% interest rate reduction for public sector workers, which expires on March 31 next year, has been extended to March 31, 2015.

Mad Cop:   O Lord our God arise
Scatter her enemies
and make them fall
Confound their politics
Frustrate their knavish tricks
On Thee our hopes we fix
God save us all!

A grand time was had by all.  But, after it’s all over, WE must face reality.  Nothing’s changed.  We continue to apply the same old prescriptions the same old ways and expect better results.  We continue to genuflect at the illusory altar of foreign creditors.  We place their interests ahead of ours.  JDX was praised worldwide because it only adversely affected Jamaican creditors.  Why don’t those who praised JDX agree to implement a similarly helpful EDX?

Also, it’s nice to note the purpose of JEEP is to “..move our people from welfare to well-being and from well-being to wealth creation”.  Good luck with that.

For our globe-trotting MOF, a word to the wide.  This isn’t an austerity budget. If you want to know what an austerity budget looks like have a peep at Spain who recently passed an austerity budget involving €27 billion in spending cuts and tax rises.  €15 billion in raised taxes mainly affected corporations.  Sales taxes weren’t increased.  Spain’s biggest companies will contribute €5.3 billion to the adjustment.  Civil servants’ salaries, which were cut by 5% in 2010, were frozen for another year.

Our debt now threatens 150% of GDP. Spain’s is 80%.  Spain wants to cut an 8.5% of GDP budget deficit to 6%.  Our fiscal deficit (11% in 2009/10) is down to 6.2%.

We ask for growth but effectively increase GCT thus disincentivizing consumer spending and production.  We’ve failed to adequately address alternative energy for four decades yet we’re increasing GCT on electricity bills to torture captive, option-absent consumers.  We keep a bloated, inefficient public service as an untouchable.  We can’t invent creative revenue positive ideas nor stimulate growth.

Austerity budgets don’t include tax cuts for corporations.  We’ve cut corporate taxes while raising taxes on the most vulnerable.  Austerity budgets don’t include politically motivated giveaway goodies and the diversion of infrastructural-specific funds to “emergency employment”.

You can’t “stimulate local investment and unleash the entrepreneurial spirit of our people” if your priority is “fiscal consolidation/responsibility and debt sustainability”.  These statements don’t compute.  How’ll we stimulate local investment?  A 16 ½% tax on electricity?  A flat tax just for trying to start up?  Cutting real capital expenditure by 30%?  NHT giveaways don’t stimulate economies.  Housing comes at the end of the economic chain which begins with a job/business; continues through savings; and ends with the purchase/construction of a house.  The 25% of working-age unemployed Jamaicans don’t care about 1% less at NHT.  They can’t be rescued by JEEP.  It appears we have one strategy namely to surrender to external creditors’ demands regardless of the disastrous consequences to Jamaica’s citizens and economy.

We’ve been there, done that.  This just in, Minister, it didn’t work then; it won’t work now.  What’s your plan for an encore when these “new taxes” are uncollectible because battered and bruised taxpayers simply can’t pay?  What’s Plan B when, thanks to these defeatist policies, inflation rises; revenues fall below projections; the economy contracts; and civil servants demand wage increases? 

How much longer will we worship foreign creditors’ whims by repeatedly jumping on the treadmill of failed “austerity” programmes crafted to ensure their regular receipts but doomed to impoverish Jamaican citizens? When will we try something new?

If we could get it right, which we haven’t, austerity budgets are what our external creditors want not what Jamaica needs.  The official argument for kow-towing to these foreign interests never ceases to amaze me.  Previous governments are blamed for borrowing binges.  This latest MOF argues from the premise that “The consequences of the accumulated debt resulted in the effective closure of international capital markets to Jamaica..” followed by this remarkable conclusion: “The bottom line is that…. access to loan markets is being reduced until we begin to pay down the debt.  The IADB and World Bank are reluctant to lend net new amounts until we have an [IMF] agreement. And the inescapable precondition of the IMF’s seal of approval is that Jamaica must embark on a programme that will steadily reduce our debt……

Is he hearing himself?  He says the problem is we’ve borrowed too much.  His solution: pay down the debt.  Why?  SO WE CAN BORROW MORE. Are we stark, staring, raving mad?  Why not produce our way out?  Why so happy to climb into the IMF’s mind box?  Why not think outside that Box?  Finger-in-the-dyke solutions won’t cut it anymore.  Spain’s temporary relief from a US$125 billion Euro bailout of its banks only allows rescue workers to focus on Italy.  As I warned months ago, this world recession isn’t going away anytime soon.  Jamaica, with the world’s biggest public debt, should prioritize a negotiated or leveraged debt cancellation or EDX. Maybe a Regional Federation would mean member states could intervene to ensure lower interest rates on our Bonds.  One thing’s certain.  Tax increases won’t help.  Despite raising taxes for decades, revenue shortfalls remain the primary cause of our fiscal deficits.    We need new thinking; bold new leaders; and new sources of taxes.

Peace and Love

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