Ian Boyne: That 1.5 won’t go away
No matter how many times the prime minister and minister of finance keep repeating themselves that they will honour their commitment to give a tax break to those earning up to $1.5 million, the media keep asking the same question over and over.
It has become tiresome. The two men cannot be clearer and more unequivocal, and yet our journalists keep asking. Of course, politicians don't have a spectacular track record of keeping their promises. So why not wait until the Budget, a deadline both have given, to see whether they will break their promise or break the International Monetary Fund (IMF) agreement? Asking them to make more promises to keep their promise hardly makes sense if you don't trust their word.
For my part, I prefer to wait until they really know where the money is coming from, rather than hear them work it out on the fly, or fly kites, as it were. What I was most grateful to hear the finance minister say after the opening of Parliament on Thursday was that he was definitely not considering oppressing the poorest Jamaicans by removing GCT exemptions on basic foods. In a recent column, I had strongly lobbied against that option, recommended by the Private Sector Working Group on taxation and even, disappointingly, by people like the Rev Garnett Roper and Imani Duncan-Price. As Shaw explained to TVJ, it would be unjust and inequitable to make people earning minimum wage or nothing at all fund tax relief for those earning up to $1.5 million. That is an important assurance.
The 1.5 commitment will be kept. It would not only be politically risky not to do so, it would erase any possibility of a 'Partnership for Prosperity' that the Holness administration is courting. People like Richard Byles don't seem to understand how much is at stake with this promise and the far-reaching implications of not keeping that single promise. And Richard is too sensible a man to make that naive suggestion about going to the Opposition to seek a "soft landing" for the Government's reneging on its promise.
The prime minister has talked about the importance of building trust. For him to start his tenure by dashing the dream of Jamaicans who voted for him to deliver that 1.5 promise would be a hard pill to swallow. This promise for the $1.5-million tax break was not simply one of a number of promises. It was the promise that put the Jamaica Labour Party in power.
And they would now simply come and tell us, "We didn't know no money was there, so we can't help you?" They just meet with the PNP, cook up a deal with them for a "soft landing" and for them not to block roads? The Gleaner, not surprisingly, was happy about Byles' advice and was fulsome in its endorsement in an editorial titled 'Government should grab the lifeline'.
Here is how The Gleaner put it: "The Government is still at the edge of the cliff, but isn't over it as yet. Hopefully, it will accept the offer of a lifeline, the latest one from Richard Byles. Mr Byles has invited the administration to rethink its election tax-relief promise, including, if necessary, engaging the Opposition on the matter."
The Gleaner says while the PNP "could gloat a bit", "fundamentally, they couldn't oppose a change in policy which they were against in the first place". It seems this is the season for naivety. Though, in this instance, I don't think it will be catching on in the JLP. It seems to me that that party knows there is no soft landing on this one and that a deal with the PNP would be a kiss of death or debt.
Damned if it does and damned if it doesn't. For if the JLP Government breaks its promise, even if it is amply justified, the PNP would be handed a powerful tool for battering the JLP in the upcoming local government elections. And that broken promise to the Jamaican people would not be something they would readily forgive. Don't take their Christianity that far.
And if the promise is kept at the expense of the IMF programme, the Government would lose the support of powerful private-sector interests and the media, whose opposition would eventually rile up the people including those who would have benefited. One of the things politicians must learn is that people want contradictory things: They want tax breaks, free tuition, free health care, good roads, schools and water, but they want small government.
They want increased social amenities, but no more taxes. If the Government is going to tax them to give a tax break, they won't regard that as prosperity.
The PNP is in no hurry to take the Government out of its dilemma, Mr Byles. Government's Hobson's choice is just what the PNP wished for them. PNP people are deliriously happy about the tight spot the Government is in. Many would be even happier if an IMF test is failed soon. You know it's true.
The Gleaner's confidence that "it would not be in their (the PNP's) interest for there to be an undermining of the fiscal accounts and the collapse of Jamaica's agreement with the International Monetary Fund, the management of which was perhaps the party's crowning achievement during its four years in office" is, well, to be charitable, wishful thinking.
I am happy that we are discussing policy issues. Those who are not partisans need to rationally consider some points. IMF prescriptions are not divinely revealed. There is no magic to their seven per cent primary surplus requirement. My friend Ralston Hyman knows that renowned economists like Paul Krugman, Joseph Stiglitz, Jeffrey Sachs and Dani Rodrik have sharply criticised IMF orthodoxy. Audley Shaw has consistently demonstrated an ability to challenge IMF orthodoxy and received wisdom. Now I have not caught the naivety bug and believe that he can dictate to the IMF or that he holds the handle.
He is the finance minister of a heavily indebted country that needs the IMF. The IMF does not need us. But what I think is safe to say is that if there is any space for creative policymaking, Audley Shaw, because of his lack of subservience, is likely to find it rather than someone overly sold on neo-liberal dogma.
The other thing is that this Government is solidly capitalist. Andrew Holness is no socialist. He is committed to fiscal prudence and fiscal conservatism. No one has to lecture him about the pitfalls of populist economics. His Government has already tabled a Budget that is smaller than last year's. That sends an important signal.
Holness and Shaw are natural-born capitalists and economic conservatives. Plus, pragmatically, they need the support of the moneyed classes, and they know if they mess with the IMF programme, that support is gone. And so would be the support of foreign investors, all multilaterals, and the international capital markets. Their balancing act is to keep faith with the Jamaican people while not alienating the local and international capitalist class. That's Andrew's big juggling act, and he is not going to take daredevil risks with it. Andrew has to find a way to convince the 81% of Jamaican youth who want to migrate, to pursue their dream for prosperity here. Austerity, by itself, cannot inspire hope. One young person quoted in that shocking survey reported in The Gleaner last week said: "Here there is stagnation. The 9-5 job cannot provide enough income, and all it does is to ensure that you don't leave your parents' house." That's what motivated many young people to vote 1.5. The prime minister, no doubt, reasons that unless he can do something to keep those persons here, no amount of austerity will lead us to prosperity.