By Don Robotham, ContributorTHE MINISTER of Finance has finally presented the expenditure side of the 2003-2004 Budget. Now that all the nonsense about "alternative economic models" has been shown to be just that nonsense we can look at the issues squarely and objectively. We should do our best to avoid the usual hysteria and demagoguery and to look our economic realities calmly in the face.
What has been revealed so far gives us an idea of the cuts in expenditure, but only an idea. The fireworks part, however, is yet to come: that will be the part which deals with the revenue side.
But while the revenue proposals are likely to generate the most heat, by themselves they are not the heart of the matter. The real key is what will be the target for the reduction in the Budget deficit, currently 8.4 per cent of GDP. Looking at the figures there can be little doubt that this must involve substantial increases in taxation, especially in property taxes. But the issue is not the level of taxes by themselves. The real question is the big picture: will the combination of taxation and cuts achieve the reduction in the deficit which we need?
The Budget announced is for $262 billion. Although this is $37 billion more on paper than the previous year, this is only on paper. In fact, taking into account inflation and devaluation, there is a cut. It should be crystal clear that this Budget reduces expenditure on social provision and contains practically nothing for inner-city renewal. Any efforts along that line will presumably have to be financed from Housing Trust funds.
But the real question that we should be asking ourselves is not whether this Budget spends enough. The real question is whether it is tough enough. Setting aside the provision of $156 billion for debt service, the vast majority of the rest of the recurrent $84 billion will go to pay wages and salaries. What this suggests is that those who say that the plan is to reduce the deficit by only three per cent are correct. This is pandering and putting off the inevitable. It is not tough enough.
You cannot argue that restoring our credit rating and increasing the prospects for growth are our priorities and then turn around and take baby steps to reduce the deficit. You cannot say, as the Prime Minister has been saying, that the war in Iraq will have a sharply negative effect on our economy and then turn around and present a Budget which does not address these anticipated shortfalls. We must stop this dreadful game of demagoguery and take the really serious steps to adjust the economy and take them now.
This is not simply a matter of satisfying our creditors and restoring our international credit rating although that is extremely important. It is a deeper issue than that. It is really a question of whether we really mean what we say when we talk about economic growth. We all agree that getting the economy to grow is the most urgent question facing Jamaica, next to the issue of crime to which it is closely related. We have an entire generation of Jamaicans who do not know what it is to live in an economy which is expanding. And we wonder why we have a high homicide rate!
But it is not possible to have growth if we have a huge deficit. And the longer we take in reducing the deficit, the longer we will have to wait for growth to occur. Over that longer time period, unemployment, despair and crime will flourish and the chances of emerging from our crisis will diminish. We can forget about any stable medium or long-term solution to crime if we do not get the economy on a steady growth path.
So, it is in the real interest of Jamaican society that we bite the bullet now and take the stringent measures to substantially reduce the deficit now. Strange as it may sound, it is in the real interest of the entire society to take harsh measures which would hurt many Jamaican people now. Not tomorrow, nor the next day, nor the next year, but right now. It is not in the interest of the Jamaican people to play around and soften the blow. If you want good, your nose have to run.
The target should not be this small reduction which will leave us with a deficit of more than five per cent. The target should be to move to a deficit of at least four per cent cutting it in half in one year. This would require deeper cuts in Government expenditure than is contained in this Budget so far. It would require that salaries of politicians and public servants be cut. That massive salary bill of over $80 billion would have to be chopped. Why is it that this could have been done in Barbados and Trinidad when they faced their economic crisis not so long ago and cannot be done in Jamaica?
Of course it is true that such a cut as I am advocating would be harsh and would involve substantial layoffs in the short term. But it would pay off in an early return to macroeconomic stability and therefore investment and growth. The real reason why it is not being put forward is not economic but political. We have gutless leaders and gutless followers too.
To take harsh economic measures requires leadership by example. It also requires 'followership' by example from the Jamaican people in living our lives more frugally. It would require both Government and Opposition to lead the country in sacrifice. Real dollars and cents sacrifice from leadership and 'followership', not idle talk about values and attitudes. Imagine: no more 'wine and go down.' No more dance hall or carnival. No more 'name brand' clothes and shoes. No more elaborate hairdo and manicure and pedicure. No more 'pretty car'. What a shocking idea!
The Government, especially after the Davies episode and with Local Government elections in the offing, is looking for ways to curry favour with the electorate. Many are looking forward to some curry. The Opposition, except for one very interesting statement by Audley Shaw, is unwilling to propose a course of action which is economically harsher than that being taken by the Government. In the midst of this very predictable opportunism, the real interests of the Jamaican people are set to one side.
This presents the Opposition with an opportunity which I hope they take. But I have my doubts. This is the chance to criticise the Government's Budget truthfully as not tough enough. Already there has been a statement attributed to Mr. Audley Shaw pointing in that direction. It seemed to be calling for harsher measures the layoff of 30,000 persons if necessary. This statement is bound to open him to jibes from the PNP and, worse, from his own JLP leader. It will be interesting to see if this line will be developed or it will die a sudden death, like Delroy Chuck's momentary opposition to the salary increases for politicians.
But Shaw should stick to his guns. The great weakness of this position is the obvious one: you cannot credibly propose such extreme hardship for other people, while pocketing huge salary increases for yourself. If you say the Budget must be tougher, then you have to start with yourself. We must begin with a give back of the salary increases and we must do this now.
But there is an even bigger problem for we should have no illusions. This is the fact that we are a fractious and individualistic people, inclined to look for short cuts. The problem of leadership in Jamaica is also a problem of 'followership'. We are not in the habit of thanking our leadership for giving us bad news. Rather the opposite. If the experience of Barbados and Trinidad is anything to go by, leadership which tells Caribbean people harsh truths and imposes stern sacrifices, even when leading by example, will not be welcome. It will be punished and severely too. ANR Rob-inson's and Erskine Sandiford's parties were practically erased from the political map of Trinidad & Tobago and Barbados. Therefore, don't hold your breath waiting on Jamaican politicians to take any such suicidal step. Only the most intense and sustained pressure from an informed public can make it happen.
