Bang-belly Budget Debate

Ian Boyne

The reason why Andrew Holness had to, at all costs, play to the gallery and pull for his bag of groceries (I didn't say 'tricks') to connect powerfully with the masses was not because of the opponents in front of him, but, perhaps, because of those sitting very close to him and because of Labourites across Jamaica who want a tough, fight-ready leader who can tek it to Portia's Government.

Andrew delivered for them last Thursday. Those who say he can't relate to people's day-to-day struggles should watch that performance. He spoke in terms people could understand and resonate with. Fuel prices tun up, light bills tun up, food prices tun up, imported raw materials tun up, unemployment tun up, devaluation tun up - hope tun dung.

He delineated clearly and poignantly how the Government's austerity measures were affecting living standards, how property taxes were burdensome, how the tax increases were biting, and how the pressures are increasing.

"We want the people listening today to understand that your current hardships are the Government's fault. I am talking to the teachers, nurses, doctors, policemen and women, civil servants, secretaries, store clerks, mechanics, plumbers, carpenters, masons, household helpers, day workers, food vendors, construction workers, farmers, taxi drivers and loader men!"

In case you did not understand, he could not be clearer. "This present hardship being visited upon the people is the work of the present Government; created all by themselves. It is a local crisis of their own doing." Good polemics, good politics. But if you can think outside of partisanship, do you really believe all the problems we are encountering are purely People's National Party (PNP)-grown and have developed over the last 16 months? I have said before, I despair for our politics, and I remain a political agnostic.

Holness asked the question that a PNP political operative was fond of asking when his party was in Opposition and seeking power, and that is, 'Are you better off today than you were ... ?' (A line copied from American political banter.) It is rhetorically appealing to the unthinking, but absolutely meaningless in serious economic discourse. Holness has now latched on to it, for it still has rhetorical force, and those in the PNP who used that kind of argument to campaign against Andrew Holness in the last election cannot come out against it now.

HAS HOLNESS LOST HIS MIND?

Holness, in addressing the slide of the dollar, made the remarkably astounding statement: "If they had gone ahead and implemented tax reform, the dollar would not have moved as it did and prices would not have increased in the dramatic way they have moved, and we the people would not be experiencing the hardship [we] are experiencing now."

Now, outside of theatrics and histrionics, does anyone believe that by simply having tax reform our dollar would have stabilised, despite the uncertainty over the delay in getting an International Monetary Fund (IMF) agreement and the lack of an infusion of foreign exchange into our economy?

If we had tax reform since the PNP came to power, our exchange rate would not be affected by market forces and our low productivity? Not just that. What the opposition leader and his finance spokesman did not spell out clearly in their stout defence of the tax-reform proposals of the Private Sector Working Group (PSWG) is that the elimination of GCT exemption from basic goods would have sent prices spiralling even higher for poor people.

Had this Government followed the private sector and the Opposition and removed more goods from zero rating, the majority of the people would be experiencing more hardships. You can say, over time, money saved would help them and we would have growth, etc., but that would not be the experience today.

Holness was very strategic in his Budget Debate presentation. He had something to appease the poor, the middle class and the business class. He made a very stout defence of the PSWG's tax proposals.

REAL DEBATE NEEDED

Holness is right that the poor have been adversely affected under this Government. But that is what austerity programmes do. Would a JLP Government have managed to avoid this if it was under an IMF programme? Let's have a real debate. Holness talked about the effects of higher customs duties and other taxes. He and Shaw talked about how the new taxes will savage consumer and business interests. They are absolutely right.

Shaw was on target: "(The) raft of new taxation, when combined, is bound to militate against investment in plant and equipment and other job-creating enterprises and the real-estate market." He said the finance minister should be encouraging housing sales rather than raising transfer taxes, which the JLP lowered. Said Shaw: "The combination of increased import costs from collapsing all fees into the GCT base and introducing a new customs administrative fee, while reintroducing higher corporate taxes, increase in stamp duties and transfer tax on asset and dividend taxes, will severely retard the productive sector from new investment and expansions."

Yes, I agree, Audley, but how the hell would this or any other Government, under an IMF agreement, where a 7.5 per cent primary surplus is imposed, close the gap in the Budget?

You see, citing these things is fine for theatrics and rhetoric, but there is little value outside that. These two parties, in their fantasy of how much power they really have, play games while retaining the delusion that they have real power. As a globalist, I have been saying that effective power lies in Washington, where our economic fate is decided.

This is no cop-out argument or subtle defence of this PNP Government. The last JLP Government was faced with the same set of unpalatable measures, and it resisted for as long as it could; called an election; but the people, fearing bitter medicine and feeling the JLP was "too wicked" and "Portia love poor people", voted for the PNP. The JLP was not wicked and Portia, indeed, loves poor people, but both Portia and Andrew are impotent to deal with our true masters, the IMF.

They can mouth off in their circus called the Budget Debate. IMF run things! Any Government we have had better do what it can to meet IMF targets. The IMF won't tell you to impose this or that tax. Its technocrats just tell you where you need to be and you decide who, then, you have to squeeze and how you will spread the burden. You can let any politician fool you by telling you that, if you vote for him, he'll give you a bigger shopping basket of goods for less money than the opponent. Let them send the fool a little further.

Shaw made some important points and openly criticised the IMF and the multilaterals. I appreciate Shaw for openly criticising the multilaterals and laying some blame at their feet. He said importantly, "In consequence, in the short term, you might, with the best luck in the world, end up balancing the books, but without growth, expansion and job-creating wealth creation." Good point.

ON POINT

He was dead on target again when he said, "The surest sign of a bang-belly economy is one in which there is no growth, yet we declare high primary surpluses and low deficits. I can state to the Government and the IMF: You cannot at once demand a high primary surplus of 7.5 per cent over the medium term while demanding that supply-side incentives and stimulus must be abandoned. It is contradictory and incongruous." Right on, Audley.

There were some high points in Audley's presentation where he provided a serious critique of IMF policy. And I think that our finance minister will agree with him, too. Our politicians on both sides need to work together to lobby against IMF positions which are injurious to our people's living standards and to private-sector growth.

Hear Audley again: "The acceptable path to achieve a high primary surplus is to maximise revenue, and this can only be done by facilitating high investment, high employment, a cultural change in our work ethic, foreign-exchange earnings to reverse the adverse balance of trade, and build foreign-exchange reserves and runaway productivity and growth in the economy." Excellent analysis and high-quality discourse, Audley.

"The programme laid out cannot achieve this," he insisted. But the larger point, Audley, is that this is the deal we have to accept, for we have mortgaged our future. Politicians, among others, over decades - not just over the last 16 months, as your leader said - have put us in this position where we have no bargaining strength with the IMF.

The policies being recommended by the IMF have been discredited, but it's rank over reason. Audley is right in saying that we have to be careful about eliminating tax waivers without a comprehensive and workable alternative. But some of the things he called for in his Budget presentation are just not achievable under any IMF programme. It's a futile call, therefore.

"We have no coherent incentive-driven tax policy that can drive growth, but we want to suck out revenue without a corresponding mechanism to encourage investment and earnings to create new revenue streams." Yes, Audley, but that is IMF neoliberal dogma. I am not insulating this Government from criticism. I am telling you as it is. I have just finished reading the just-released 202-page authoritative Human Development Report 2013, put out by the United Nations Development Programme. It is titled The Rise of the South: Human Progress in a Diverse World. It shows that the policies driving growth are the opposite of what the IMF is pushing.

Says the report: "There is also evidence that deploying drastic programmes too quickly can deepen and prolong recessions. Fiscal consolidation has already led to contractionary effects on private domestic demand and GDP, while weakening economic conditions and increasing unemployment." Which is exactly what Audley warned about with regard to our IMF programme. It's time we raise the calibre of our debate and realise that we might be fighting one another when all our battles are not local.

Ian Boyne is a veteran journalist. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.