An­tho­ny Wil­son

It was cer­tain­ly no se­cret to the Peo­ple's Part­ner­ship ad­min­is­tra­tion that Trinidad and To­ba­go record­ed a $7.4 bil­lion bud­get deficit in the 2009 fis­cal year and the ini­tial pro­jec­tions were for a sim­i­lar deficit in 2010 fis­cal year. In the 2010 bud­get, it was stat­ed clear­ly that based on an oil price of US$55 a bar­rel and a nat­ur­al gas price of US$2.75 per mil­lion cu­bic feet, the fore­cast for to­tal rev­enue in 2010 was $36.6 bil­lion and the to­tal bud­get­ed ex­pen­di­ture was pro­ject­ed at $44.4 bil­lion–af­ter ad­just­ing for the re­pay­ment of cap­i­tal and con­tri­bu­tions to the Sink­ing Fund.

So, de­spite the fact that the Peo­ple's Part­ner­ship must have known the coun­try's eco­nom­ic sit­u­a­tion be­fore last month, its man­i­festo con­tains ab­solute­ly no ref­er­ences to rev­enue-rais­ing mea­sures. The word "rev­enue" is used twice in the man­i­festo: once to re­fer to the Board of In­land Rev­enue and the oth­er time a pro­pos­al that the Eco­nom­ic De­vel­op­ment Board would make rec­om­men­da­tions for the fair and eq­ui­table dis­tri­b­u­tion of na­tion­al rev­enue among Cen­tral Gov­ern­ment, To­ba­go and lo­cal gov­ern­ment bod­ies.

The man­i­festo con­tains four ref­er­ences to tax­es or tax­a­tion, one of which is the cat­e­gor­i­cal state­ment in the 120-day plan: "We will re­scind the prop­er­ty tax." No ref­er­ence there to abol­ish­ing the prop­er­ty tax on­ly for home­own­ers! It's al­most as though none of the econ­o­mists in the Peo­ple's Part­ner­ship re­alised be­fore the gen­er­al elec­tion that mon­ey is the medi­um of ex­change in mod­ern economies and that gov­ern­ments need to levy tax­es in or­der to pay for tri­fles like health and ed­u­ca­tion, se­cu­ri­ty and road main­te­nance.

A pa­per pre­sent­ed by Min­is­ter of Fi­nance, Win­ston Dook­er­an, on June 11 en­ti­tled "The state of our fi­nances and ini­tia­tives for fu­ture ac­tion," at least in­di­cates that the coali­tion in gov­ern­ment ac­knowl­edges the im­por­tance of rev­enues to run the coun­try. In that doc­u­ment, in which rev­enue is re­ferred to 11 times, refers to the bud­get deficits for 2009 and 2010: "This trend to­wards fis­cal deficits con­tributes sig­nif­i­cant­ly to the coun­try's in­debt­ed­ness and if it is not re­versed ur­gent­ly could re­sult in the vir­tu­al mort­gag­ing of sev­er­al gen­er­a­tions to come."

The doc­u­ment al­so points out that in the cur­rent fis­cal year, the coun­try's deficit be­tween re­cur­rent ex­pen­di­ture and re­cur­rent rev­enue "pos­es tremen­dous down­side risks for fis­cal sus­tain­abil­i­ty and debt man­age­ment in the fu­ture." There is al­so a ref­er­ence to the fact that the to­tal Gov­ern­ment cash bal­ances de­clined from $17.7 bil­lion at the end of the 2008 fis­cal year (Sep­tem­ber 30, 2008) to $5.43 bil­lion as at June, 2010. "In sim­ple terms, the Gov­ern­ment's bal­ances in the Trea­sury de­clined sub­stan­tial­ly over the last two years as the pre­vi­ous ad­min­is­tra­tion sought to main­tain its high ex­pen­di­ture lev­els in the face of dras­ti­cal­ly falling rev­enues."

All of this sug­gests an ac­knowl­edg­ment by the Gov­ern­ment that the bal­ance be­tween T&T's ex­pen­di­ture and rev­enues needs to be re­dressed or our eco­nom­ic fu­ture could be threat­ened. While there is use­ful, if in­com­plete, analy­sis of the cur­rent fi­nan­cial sit­u­a­tion, the Dook­er­an doc­u­ment con­tains no pro­pos­als, no pro­jec­tions and no plan about how the Gov­ern­ment in­tends to go about in­creas­ing T&T's tax rev­enue and/or re­duc­ing its ex­pen­di­ture dur­ing the 2011 fis­cal year.

There is no in­di­ca­tion in ei­ther the man­i­festo or the re­port on the state of T&T's fi­nances that the new Gov­ern­ment's eco­nom­ic team, com­pris­ing Mr Dook­er­an, Mary King, Prof Patrick Wat­son and oth­ers, has a clear no­tion about how T&T is go­ing to re­duce the bud­get deficit in the 2011 and 2012 bud­gets. In try­ing to get the bal­ance right, will Mr Dook­er­an and his team put the fo­cus more on re­duc­ing ex­pen­di­ture, fol­low­ing the re­cent Eu­ro­pean mod­el, or on in­creas­ing tax­es? Does Mr Dook­er­an agree with the po­si­tion ar­tic­u­lat­ed by the UK's Chan­cel­lor of the Ex­che­quer, George Os­borne, de­liv­er­ing their bud­get on June 22 that that coali­tion gov­ern­ment "be­lieves that the bulk of the re­duc­tion must come from low­er spend­ing rather than high­er tax­es?"

Does Mr Dook­er­an agree with Os­borne, that the in­ter­na­tion­al ev­i­dence, from the IMF, the OECD and oth­ers, found that "con­sol­i­da­tions de­liv­ered through low­er spend­ing are more ef­fec­tive at cor­rect­ing deficits and boost­ing growth than con­sol­i­da­tions de­liv­ered through tax in­creas­es." And if he agrees with Os­borne's 80/20 bal­ance be­tween cut­ting ex­pen­di­ture and rais­ing tax­es, where does Mr Dook­er­an pro­pose to re­duce spend­ing if half of the 2010 bud­get ($22.1 bil­lion out of $44.3 bil­lion) was al­lo­cat­ed to trans­fers and sub­si­dies?

Pre­vi­ous ad­min­is­tra­tions in this coun­try have used trans­fers and sub­si­dies–which in­clude every­thing from the pro­vi­sion of free drugs and af­ford­able in­ter-is­land trans­port to GATE and the sale of gaso­line at be­low the cost of pro­duc­tion–to en­sure that the wealth from T&T's nat­ur­al re­sources trick­led down to the mass of the pop­u­la­tion. Will Mr Dook­er­an turn his back on the well-es­tab­lished pol­i­cy of trans­fer­ring wealth to and pro­vid­ing sub­si­dies for the pop­u­la­tion? Or is he lean­ing to­wards the ap­proach of Prince­ton Uni­ver­si­ty Pro­fes­sor Paul Krug­man who has re­peat­ed­ly ar­gued in his New York Times col­umn, that coun­tries which cut spend­ing and stim­u­lus be­fore economies are ful­ly re­vived run the risk of dam­ag­ing their coun­tries?

Krug­man wrote on Sun­day: We are now, I fear, in the ear­ly stages of a third de­pres­sion.....And this third de­pres­sion will be pri­mar­i­ly a fail­ure of pol­i­cy. Around the world – most re­cent­ly at last week­end's deeply dis­cour­ag­ing G-20 meet­ing – gov­ern­ments are ob­sess­ing about in­fla­tion when the re­al threat is de­fla­tion, preach­ing the need for belt-tight­en­ing when the re­al prob­lem is in­ad­e­quate spend­ing."

Does Mr Dook­er­an fol­low Os­borne or Krug­man?