Dawn Ritch, Contributor
APART FROM any discussions that Dr. Omar Davies, Finance Minister, might be having with the International Monetary Fund, it's as though the Budget was crafted on the planet Mars.
The Government proposes to collect an additional $14 billion from Jamaican taxpayers, and has increased public expenditure accordingly.
This is preposterous. The country is in prolonged economic crisis and recession, occasioned by the Minister's own on-going blunders in fiscal and monetary policies. It is not immediately apparent therefore, where Jamaican businesses and individuals are to find the resources to pay these taxes. Does Dr. Davies really have a chance of collecting them?
Our primary trading partner America, may slip into a double-dip recession. The U.S. airline industry is in trouble, and 200 jets have been mothballed in the Mohave Desert in hope of future recovery. It is not clear therefore, which carriers will be buying the new 7E7 currently being developed by Boeing, a leader in the U.S. defence and airline industry. A sign of the times, the Economist recently noted, is that the 'E' in the name of the new commercial passenger jet stands for 'Efficiency'.
First quarter auto sales in America are down to levels not seen in almost five years. According to a report released by Morgan Keegan and Co., Inc. (a U.S. stockbroking company) it further states, "As a result, auto inventories are at an all time record high of four million vehicles. GM has announced it will cut production by 10 per cent in the second quarter, while #2 Ford said they will trim production by 17 per cent. "On the employment front, files for 1st time unemployment claims this week (April 24) are reported at 455,000, the highest level in more than a year."
CNN also reported in the week of April 24, that summer jobs in America are difficult to find, because they've been taken up by breadwinners needing more than two jobs.
With jetliners mothballed, major cuts in car production because of dropping sales despite 0 per cent financing, and an increase in unemployed Americans, it is not immediately apparent who will be buying Jamaica's bauxite or coming to our shores for a vacation.
ECONOMIC PROSPECTS
Optimists about Jamaica's economic prospects note, however, that SARS is keeping tourists out of Asia and Canada. Fears of terrorism are depressing tourism in Europe and the Mediterranean. The hope is therefore that Jamaica and the Caribbean might benefit.
What this analysis overlooks is that Asia is not only a tourism destination. It is the contract manufacturing location of choice for American companies. Information technology, shoes, and garments, for example. The fear is that if the rate of illness and fatality from SARS is not arrested quickly manufacture quality may be reduced and supplies interrupted. This will affect American earnings, and could lead to relocation to areas of higher cost manufacture like Latin America.
Declining American company earnings will continue to affect American jobs. This is why President George W. Bush is trying to ram through a major tax cut, not increase taxes. The outlook for the Jamaican bauxite and tourism industries is therefore not promising. These are our major foreign exchange earners, and the future outlook is uncertain. America is the driver of the world economy, and they are uncertain.
It seems slightly redundant to note that people worried about their jobs don't take overseas vacations.
How on earth therefore could Dr. Davies have just tabled the biggest 'tax and spend' budget in the history of Jamaica? Neither he nor the Most Honourable Prime Minister P.J. Patterson seems to live on this planet. In most countries around the world when economies contract most governments cut taxes, not increase them in order to stimulate growth. The Jamaican Government is doing the total opposite.
The obvious thing to have done was cut public expenditure, not increase it. And lighten the load of Jamaican taxpayers stumbling under existing rates and taxes. Instead the Government has made the load heavier than ever before.
ASTRONOMICAL INCREASE
Readers will remember that an astronomical increase in civil servant's pay is to add nearly $20 billion of expenditure to the national budget with leave entitlement. This monumental pay increase is based upon 80 per cent of market rate, because this is what was agreed to some years ago.
If this is indeed a market rate, then it is supposed to fluctuate like the market and go up and down based on ability to pay and performance.
Right now the market rate in Jamaica has fallen off a cliff. This should lead to pay cuts and lay-offs in the private as well as public sectors. It certainly can't lead to huge pay increases for the civil service. Neither the formula, nor the realities of local and international economic conditions therefore provide any justification for this expenditure. It does not require a committee to examine this matter. This is just another delaying tactic from the Most Honourable.
The salary of Ministers of Govern-ment, however, is tied to that of Permanent Secretaries in the civil service. So any pay cut in the civil service will cause a cut in theirs. No wonder they are in no rush to cut anything other than to choke what little life is left in the Jamaican economy. The present formula leads to elected politicians getting automatic salary increases without anybody knowing anything. Not a soul would have known about it had Delroy Chuck not expressed his consternation publicly on radio at a large increase in salary.
As for the new Performance and Appraisal System among teachers and civil servants that will in future link pay increases to job performance, not a word has been said by the Prime Minister about applying it to himself and his Cabinet. Clearly their pay is not linked to performance.
Nothing can alter the reality, however, that when countries or people are deeply in debt, they must reduce their expenditures and endeavour to increase their income by being more productive. This elementary fact escapes both Dr. Davies and the Most Honourable. It does not escape those who have to earn the money they spend. Perhaps if the Government were to think instead of revenue coming only from earnings, they might create the conditions to enhance the productive capacity of the country.
When one's salary is not based on performance, however, it's hard to be realistic.
