Budget clash: Youth vs middle class; austerity or largesse?

Not since Eric Gairy’s “Land for the Landless” program has a Government of Grenada set up a senseless and damaging conflict between two sections of the population, as is being set up today between the middle class and the youth.

It is plain to see that the middle class is being taxed to pay for the Government’s promises to the youth of the country. While the middle class is being called upon to pay about $40 million in additional taxes, levies, user fees and licences, Government can find an additional $46 million to allocate to its youth program. This highpoint of the 2014 budget was delivered with one pre-loaded stroke of the pen and one eye smiling at the teleprompter!

The battle lines have been drawn! Time to reveal the play! It is now established by Government that the young people participating in the New IMANI program under the Ministry of Youth and Sport, are in fact paid workers. (The PWU should move swiftly to unionise them before TAWU, with its’ insider access, makes a pre-emptive strike!)

The first and most significant implication of that classification is that there is a payroll effect on the public finances, bearing in mind that this program cannot be justified as capital expenditure, i.e. given its true nature, it is not a project.

This means that the almost 200 per cent increase ($46 million) to that Ministry must affect the declared objective of reducing the public sector wage bill. Put differently, common sense will show, and the Government must tell the public, that the relevant percentage of this massive increase will move us from 70 cents on the dollar to a higher figure!

Curiously, the budget address does not disclose, as a benchmark, what change in the public sector wage bill is planned or anticipated for 2014. One would have thought that the aim was to begin to get that cost trending downwards.

Recall that the Prime Minister has insisted that getting the financial support of some in the international community depended on reducing these costs which otherwise would jeopardise the success of the Structural Adjustment Program. This is the same logic behind the announcement that there will be no salary increases during the SAP period.

The confounding message now is that Government is picking and choosing which category of ‘workers’ will get more from the public purse. Teachers and traditional Public Officers are not numbered in that category. This is very reminiscent of the early years of the Vote 340 largesse culture.

When considering the budget allocation for the Youth Ministry, one must pay attention not just to the arithmetic, but also to the motives behind the figures.This is important because it is the pursuit of specific political motives that led to the fiscal problems now affecting the country. It is one thing to have objectives, but it is another thing, approaching irresponsibility, not to foresee the financial consequences of pursuing such goals.

So the problem is not with the objectives as such, it is with human thinking informing the setting and pursuit of these goals. In this sense, one would realise that the problem with the state of the economy was largely man-made.

As things stand today, another man-made crisis may soon befall our country on account of irrational political thinking that limits itself to an incomplete vision. Here it is that the Government is loudly trumpeting its commitment to youth development, but considers that it is sufficient simply to allocate monies to hire more trainee-workers (IMANI) and a bit to youth enterprise development.

Clearly, this defines only a very short-term commitment. No consideration is given to the need for accompanying investment strategies by both the private sector and the Government to achieve production platforms that would allow for the consumption of the skills acquired by the youths through gainful and sustainable employment. The core argument here is that youth investment must be a component of an integrated investment plan/strategy designed to push the economy upwards thereby producing viable jobs.

Search the budget book and ask yourself how much of the $46 million increase is being applied to finance new industries and production systems to absorb the young people after their training? If you find zero, then ask whether the young people in particular and Grenada as a whole would not be better off if $20 million of that money went to building new industries, for example, a bigger and more modern fishing fleet and fish processing facilities? So we are spending money only to be returned to the starting point of the circle.

A limited vision for youth development that is not caught within a wider vision of new production frontiers amounts only to ‘ABC’ division! It reduces welfare and lessens genuine economic progress. In reality, it leaves Grenada with a high and wasteful price to pay.

Nobody puts $70 million into an enterprise without expecting a pay day! No Government, in conditions of financial drought and fiscal crisis, allocates almost $50 million more to a Ministry that itself does not deliver real time production and financial returns to the Treasury, WITHOUT having clear political motives for doing so.

By no account, whether it is investing in the future or averting social tensions or doing what is fair and just, is a $50 million precipitous increase able to measure up to basic standards of prudent management of scarce resources. It is as unprecedented as it is unwise. What is dangerous about the situation is that the middle class is being taxed to death to save the life of the regime.

Instead of a carefully planned strategy to solidly improve the lot of the youth, the Government has opted for its familiar practice of distributing ‘dressed-up’ largesse with its eyes on the vote.

Evidently, the Government has decided to take a calculated risk on the assumption that the main opposition party dare not criticise the “support” for the youth for fear of not getting their votes. So the country is struggling with an economic problem, but the Government’s dominant instincts are to look after itself.

A further assumption seems to be that most of the parents of the young people belong to the middle class and that ‘child’ income will compensate for ‘parent’ loss through increased taxation. Simply put, you take it from mummy and daddy and give it to their children. The worst case scenario seems to be that should the middle class disrupt the life of the regime over the new tax burden, then there is an electoral safeguard through the young vote.

The 2014 budget with respect to the allocation for the New IMANI program might well prove to be an instrument of social conflict in Grenada. Gairy’s ‘Land for the Landless’ program re-distributed land, but it led to the demise of the estate model of agricultural production with its efficiencies in output and access to capital.

Just as with the building of more and more farm roads, Government today acts as though roads are the only inputs needed to stir agricultural production. Big mistake! Now we are loading up another big mistake by over-taxing the middle class to give stipends/wages to young people deemed to be workers.

The question is what will Grenada get in return? Our contention is that the ‘sacrifice’ money (new taxes) is best used for production purposes intended to deliver real jobs and real revenues to the Treasury to pay the debt and other obligations.

To spend that money for other purposes will render the sacrifice unworthy and it will burn up before our very eyes. If Government could earmark the monies expected from selling citizenship to financing capital expenditure, then it could similarly earmark the revenues from the increased taxation to productive investment purposes.

Otherwise, in Tangler’s words, “d ting doh wuk”!



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