Wednesday, April 24, 2024

WHAT MATTERS MOST: Power of perfect folly

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THE MINISTER OF FINANCE continues to see the Barbados economy as his plaything to be used in the game of politics, while Barbadians are genuinely suffering.

Unfortunately, the media is simply to report what he says and not question the contents.

His approach was in evidence as far back as 2010, when in an attempt to upstage a Press conference of the Opposition, he went around to the media houses and secured a headline that there was a spurt in economic growth.

The spurt was unfortunately 0.3 per cent, which is a tenth of three cents in every dollar or alternatively, three dollars in every thousand.

Imagine receiving a salary increase of that amount.

In the lead-up to the current Estimates debate, he was busy trying to sway public opinion that the country’s fiscal position was on the mend.

To do so, he has been armed with a new concept called the primary fiscal deficit, which is a concoction that ignores a country’s interest payments on debt as part of the deficit. It is a fanciful theoretical concept that has no place in the practical economic world; the interest cost on debt has to be repaid period.

Any attempt by the minister of finance to make it part of the fiscal vocabulary of Barbadians is designed to impress upon you that the power of persuasion is more critical than the purchasing power of your pockets.

In essence, he is saying please ignore your genuine suffering and focusing on the big picture. This translates to: even though you are worse off individually, when you are summed together the whole is better. This is the power of perfect folly rather than persuasion.

The plaything gets worse when the minister of finance quotes from his own Estimates document incorrectly on the size of the fiscal deficit for the current fiscal year.

While the deficit is estimated at 8.1 per cent of the Gross Domestic Product which means precious little to the average man, he repeatedly used 7.1 per cent in a news item and it was carried without question. The reason why the deficit is presented like this is to add further confusion to the true state of the economy.

In August 2014, the same minister of finance told Barbadians that the fiscal position was so bad that failure to correct it could threaten the value of the Barbados dollar. The fear of devaluation was used to justify imposing more taxes on our backs with a promise that a specific target of 6.6 per cent of GDP had to be met by the end of March 2015.

The real short-term objective was to send the signal to the international credit market that the Government was doing something to encourage the restoration of confidence in the Barbados economy.

Having now indicated in the Estimates that the target will not be met and the true figure is in the region of 8.1 per cent or some $140 million worse than expected, the minister is on a crusade to justify why failure is success.

Furthermore, he nor the Government seems willing to accept failure and so once again Barbadians are being made to believe that they have failed in not making more revenue available to the Government.

This most recent misguided opinion started with his presentation to the Editorial Forum of the Nation, when he presented figures which suggested that Barbadians are paying $1.4 billion in taxes on a taxable income base of $4 billion. The minister of finance contended that a yield of 35 cents out of every dollar is insufficient and that he needs to raise more taxes from Barbadians. What utter rubbish!

A report of the Inter-American Development Bank recently confirmed that Barbados has the highest tax-take in the region. While the tax-take has been increasing under this Government, the truth is that Barbadians have tolerated high taxation in return for access to social services such as education, health and care for the elderly.

The contract with the current Government has however changed to the disadvantage of Barbadians.

By any stretch of the imagination and in any language, taking 35 cents out of every dollar of a taxpayer is a very significant amount, especially for a Government that has made very poor policy choices in the last seven years. These choices have been pursued at the expense not only of the people, but some of the major institutions of governance in the country.

After every new piece of economic news, the minister’s language changes for the bad.

Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email mascoll_clyde@hotmail.com

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