EDITORIAL - Debate Senator Clarke's suggestion

Opposition Senator Nigel Clarke's suggestion of a special majority for any amendment to the proposed law on how the Government must manage its fiscal arrangements deserves serious debate.

And given that the agreement with the International Monetary Fund requires that the legislation be in place before the start of the new fiscal year in April, it is urgent that the administration publish the draft bill. At the very least, the finance minister, Peter Phillips, should place in the public sphere not only the key elements of the bill, but his response to Mr Clarke's suggestion of a two-thirds majority in each chamber of the legislature for amending the law, once it is passed.

Mr Clarke, a senior corporate executive, is likely to find more than a fair bit of sympathy for his idea. For, as he argued in an op-ed piece in this newspaper Monday, the record of Jamaican governments leaves people with little trust in their will to manage the country's fiscal affairs with discipline.

That history, and its consequences, make capital shy of Jamaica. Or, as Mr Clarke put it: "Capital will ... not commit itself in the long term where there is doubt."

long-term fiscal stability

And even with credible fiscal rules, he believes capital will continue to be wary about the country's long-term fiscal stability, if it feels that a government can, at any time, on a whim, change the rules. A barrier to political whimsy, therefore, is to allow amendments only "with the affirmative vote of a two-thirds majority of both Houses of Parliament".

A likely concern for economic policymakers, however, would be the absence of flexibility to respond, in timely fashion, to economic shocks. Indeed, an intransigent political opposition could, in the circumstances, hold economic policy hostage to its own partisan agenda.

Indeed, the dangers of policy rigidity have caused significant discussion among Europeans in the Eurozone's debt crisis, as well as in the on-and-off debate on whether Jamaica should abandon its domestic currency in favour of the US dollar as a hedge against inflation and fiscal excesses.

fiscal responsibility

Nonetheless, the need for fiscal responsibility, buttressed by strong rules to ensure that governments stay in line, is gaining in credence. It has been long, and publicly, embraced by thisnewspaper.

Indeed, 14 months ago, at the passage of a law establishing limits on the Government's annual borrowing, we insisted that was only one part of what was required.

We said then: "We would have welcomed a declared and specified cap on the fiscal deficit any government is able to run, rather than leaving it to the good sense and management of the finance minister, even with the transparency in debt accumulation and management oversight that will be consequences of the law."

In fact, we argued that even if Jamaica met its projected debt ratios, there was "nothing to prevent some future irresponsible finance minister from leading Jamaica into another chasm of overspending and overborrowing". That, of course, is the flip side of fiscal irresponsibility.

Beyond the issue placed on the table by Mr Clarke, as suggested at the time of the borrowing law, we feel that the matter of penalties against a finance minister who breaks the rules should be considered.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.