Tue | Oct 17, 2017

Holness’ economic suicide plan

Published:Sunday | February 14, 2016 | 12:00 AM

In 2011, after four years of Audley's economic management, Andrew Holness surveyed the horizon and forecast "bitter medicine" for Jamaicans. Four years later, after four years of Peter's economic management, he sees a surplus of more than $30 billion he feels the Government can give up. What a monumental change!

Is Andrew joining Mr Obama, Mr Cameron, the IMF, the World Bank, the international rating agencies, EPOC, and the local private sector and civil society in giving a resounding endorsement to Portia and Peter for turning around Jamaica's economic fortunes? Because this promising is beyond Roger talking about nyammin' oxtail and bowl o' rice!

Let's back up a bit. The first thing to remark is how much Andrew has developed as a political speaker. He's just more fun to listen to. He develops ideas from the platform, and pitches at a level where he's explaining reasonably complicated ideas to a mass audience, and, I thought, doing it well.

 

SUPERMARKET BASKET

 

My favourite part of his presentation is the supermarket basket where he asks what $3,000 could buy you in 2011 compared to today. Of course, it's not a fair comparison to Audley's "play now, pay later" approach of subsidising imported goods by keeping the currency artificially overvalued with IMF money while dodging them. And if he's being fair, he must acknowledge the record-low inflation now.

But that's beside the point. It is great political theatre, and Andrew's enjoyment in giving that part of the presentation was self-evident. Additionally, while he was presenting the basket, the music selector drew for Kartel's 'Money Mi A Look (A weh yuh deh?)'. It was Showa fi de sardine, rice and flour. All the same, Andrew needs to listen to the Kartel tune again. Professor Vybz clearly states: "Weh due to Caesar, give to Caesar!" but wi soon get to that.

He has to be held to account for his ideas. And the problem is that while some of Andrew's smaller ideas are worth developing (fixed election date, term limits, reducing transactional costs on real estate), the BIG IDEA he's pushing isn't ready.

In fact, it's half-baked, even though, to again give Andrew credit, it's well designed to exploit populist unhappiness with the "bitter medicine" and desire to play now and pay later. I speak, of course, of the dramatic increase of the income tax threshold that would delete three-quarters of income taxpayers from the ledger.

Now the idea of leaving money in taxpayers' pockets is generally the best idea in the world. But if Andrew is to be taken seriously, he needs to tell us how he plans to pay for his electoral largesse. In particular, what will he cut to accommodate this massive tax rebate? Or what new source of funding will be identified to make up the difference? It's not enough to say that you and Audley have worked out some maths on the matter. Audley? Maths?

Peter Phillips estimates his opponent's wide-ranging platform promises at about $100 billion so far. Ralston Hyman estimates that the tax rebate alone would cost some $32 billion in revenue. By the way, the withdrawal of auxiliary fees from schools would deduct about $4 billion. Kiss goodbye to the early childhood gains. Again: "Play now, pay later."

It's been pointed out that Andrew and Audley's pronouncements have the air of a slightly sophisticated undergraduate tossing out ideas that sound round, but have little bearing on reality. It's true. Monumental policy shifts are presented with zero analysis and without a single number being mentioned. There's precious little discussion of their impact, and there are policy positions that are flat out contradictory.

 

FISCAL DISCIPLINE

 

How can you commit to civil society that you will maintain fiscal discipline and abide by the agreements with the multinational agencies, but then start to promise out freeness at every turn? How can you propose doubling the minimum wage and near tripling the income tax threshold without uttering one word about the massive inflationary impact these would have? How can you, as you have promised, increase spending dramatically, lower many taxes and abandon others, but yet still stick to the fiscal targets and debt-reduction plan?

Seriously, what was that policy discussion like?

Andrew: "Oye, Man-a-Yard! Yuh know weh wi shoulda do fi win dis ting? Tell de people seh dem nuh haffi pay nuh tax. Dem mus' love wi if wi do dat!"

Audley: "Fi real! Mek wi tell dem wi gwine double de income tax threshold! Yes, man! Raise it backside to 1 million dollaz!"

Andrew: "Hmmm (thinking)! Naw, man! Ah ramp yuh ah ramp! Mek wi tun it UP to 1.5 and jook Peter Phillips! Bout Man of The Year? Wha' dat? Mi a Man of the Century!"

Audley: "My leader! Hardcore! Mek wi dweet! Up! Up!"

So the real problem is that Andrew might actually try to do this, which would lead straight to economic collapse. And Audley? Don't put anything beyond Audley.

The fact is, in the absence of explaining where they intend to pick up the foregone revenue, Andrew and Audley have put forward a programme for collective economic suicide. Momma's brief happiness with the new income tax threshold will evaporate pretty quickly with the hyperinflation and runaway dollar. There would be no auxiliary fees, but the schools would be less worth attending. Interest rates will rise and foreign direct investment will revert to trickling like molasses, like in 2011. We will play, but then we will have to pay.

We will become poorer, more indebted, and more desperate. The hard-won confidence that has been building will immediately dissipate. The sacrifices of the last three years will be squandered.

Of course, we can hope it's just election samfie. After all, pressure buss pipe. This is, essentially, the Tweedledee and Tweedledum theory advanced by the Man of the Year. But suppose the Tweedles are serious?

- Daniel Thwaites is an attorney-at-law. Email feedback to columns@gleanerjm.com.