In the post-Budget breakfast session held by the Barbados Chamber of Industry and Commerce, I expressed my views on the 2011 Budgetary Proposals as presented by the Honourable Minister of Finance and Economic Affairs – views that up to now still have some politicians and their supporters behaving bizarrely.
While it is not my intention to use this column to make political points, I have a moral responsibility to my students at the Cave Hill Campus and to myself to defend my positions on economic matters and the economics discipline as a whole.
In last week’s edition of the BARBADOS BUSINESS AUTHORITY, Anthony Johnson expressed disagreement with me on the question of whether Barbados does in fact have a revenue or expenditure problem or both.
Johnson said: “He [that’s me] took the American situation and tried to juxtapose that on the Caribbean by suggesting there is no revenue deficit but mainly an expenditure problem. Again, that can’t be true because revenue is limited.”
My first reaction on reading this statement was: what utter nonsense and what precisely is he saying? Can his alleged statements be backed by empirical data?
Rather than answering this question, let me present, once and for all, the evidence in support of my position that “Barbados does not have a revenue problem but an expenditure crisis”.
In its review of the performance of the economy for the first six months of 2011 (Table 4: Summary of Government Operations in millions), the Central Bank of Barbados reported tax revenue for the years 2004/2005 to 2010/2011(p) to be $1 820.3, $2 042.3, $2 130.8, $2 337.0, $2 396.1, $2 159.3, and $2 201.0, respectively. On the current expenditure side, the figures were $1 838.9, $2 001.6, $2 112.4, $2 521.8, $2 786.7, $2 811.5, and $2 913.0, respectively.
Except for 2009/2010, tax revenue has increased steadily every year. Current expenditure, on the other hand, has risen each year.
Just for the record, the largest deficit on the current account in Barbados prior to 2010/2011 was $21 million. Today, the deficit exceeds $500 million. Why? As the figures from the Central Bank’s report confirm, the average annual growth in tax revenue of 3.5 per cent has been outstripped by the ever increasing rate of expansion of current expenditure – an expansion that averages over eight per cent per year.
Those are the facts. Does anyone want to dispute these facts?
If anyone is willing to challenge me on economic issues I discuss based on the facts, so be it. If we want to debate issues and contribute to the Barbadian public knowledge base, let us engage in serious economics, not politics!
