Rethinking the modern welfare state by whatever name
thenassauguardian editorial
Bahamians should monitor closely the economic events in Europe and the United States. Several European countries such as Spain, Portugal and Italy are having trouble managing their debts. Other European economies such as Ireland and Greece have already been bailed out; but may still need additional help again soon.
There are fears that a European debt crisis could emerge creating conditions similar to the financial crisis of 2008, which led to the most significant recession since the Great Depression.
As Europe tries to fix itself, and there is no easy solution, a bitter debate in the United States over debt and spending rages. The U.S. has a debt to GDP ratio of around 100 percent that is growing. Conservatives want to see deep cuts to entitlement spending. Liberals want to maintain the social programs they think support a just society
The U.S. and Western European countries had high levels of debt before the financial crisis. The amount of money states used to support their economies after the crisis, however, significantly increased those debt levels. Now, tough decisions have to be made. The old levels of spending can no longer be supported. If they are maintained, collapse will eventually be the result.
The problem is that in modern states people have come to believe that they have the right to every benefit under the sun. Many think they should have free health care, free education, unemployment benefits, pensions, etc. In previous good times when these things could be afforded, politicians kept piling on benefits and giving subsidies to appease voters and financiers.
The time has now come in the Western World to roll back these ‘gifts’ and rethink the role of government.
In truth, people do not have the right to any benefit or gift from the state. The whole idea of rights is too based on religious thinking and assumptions on what ought to be bestowed to humans by a mysterious divine source.
Countries, communities and social groups can only provide the level of entitlements that can be afforded. Governments can and ought to act as back stops for the downtrodden if they can afford to so do, and not otherwise. So, if you live in oil rich Norway, then the sky is the limit. That state can afford to spoil its citizens.
When you live in a developing society with a debt to GDP ratio approaching 100 percent, there is little the state can do for you.
Government should function first and foremost as a regulator. Its job should be to ensure that fair and open marketplaces exist, through which citizens can make a living. Government should also work to ensure the safety of the common area from internal and external threats.
Beyond this, all the other benefits a state could offer should be based on the resources at its disposal, after consultation with the people.
Under this mindset, it becomes easy for a country to make decisions as to the cuts necessary for growth in the economy to return. Wasteful programs and subsidies, to the poor, as well as to the rich, must be cut across the board in the West in order for taxes to be reduced and for the private sector to have more space to expand. Unnecessary and onerous regulations also need to be removed, creating a more favorable atmosphere for entrepreneurs to take risks.
Here in The Bahamas we are burdened by more and more regulations and by a large and inefficient public service. Our solution, it seems, to the down times is to continue to impose more regulations and to pay the public sector come what may and to borrow and borrow to so do. We cannot keep this up forever.
It is obvious what needs to be done. But it will not be done until people here abandon the idea that a welfare state, by what ever name, is the answer.
Aug 10, 2011
thenassauguardian editorial
A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
Showing posts with label public service Bahamas. Show all posts
Showing posts with label public service Bahamas. Show all posts
Thursday, August 11, 2011
Friday, February 25, 2011
Continuing budget deficits and the national debt... Bahamas
The mid-term budget
thenassauguardian editorial
The prime minister and minister of finance has presented to Parliament a statement on the fiscal affairs of the country for the six month period ending 31st December, 2010. It seems clear that the country is still being severely challenged on the fiscal front and the economy has yet to emerge from the depths of the global recession.
The most important budgetary item, total revenue, is trailing estimates by $50 million despite the tax hikes and the improved revenue administration announced at the start of this current budgetary cycle.
That outcome is not surprising when one considers that in our economy, our major source of government revenue is customs duties, which are determined by the level of imports, which in turn is determined by employment levels and tourists arrivals.
Unemployment is in the mid-teens, according to the latest available figures which have not been released since 2009, and air-arrivals — the most important tourist category — is seemingly stagnant at 1.3 million; a figure that has hardly changed in two decades.
From a policy perspective, it seems clear that efforts to boost tourist arrivals (by air) and at the same time expand employment opportunities are of critical importance going forward.
Although the budget statement gave a hint of cautious optimism regarding the outlook for economic growth and development over the short term, it is difficult to overlook the ominous threat to that growth also contained in the statement in reference to the almost 24 percent increase in gas prices at the pump and the 37 percent increase in the surcharge applied by B.E.C. to our electricity bills.
It would appear that the consumer, who continues to buckle under the more than $1 billion in loan arrears at the bank (mostly in mortgages), will continue to face serious financial challenges for the rest of the year.
The mid-term budget permits, among other things, for Parliament to approve by way of a supplementary expenditure Bill any additional funding that is needed for specific line items in the original budget. In this exercise, an additional $10 million was needed for the e-government initiative; $18 million is earmarked for payment to the utility companies; nearly $4 million for the police; and another $4 million for medicine.
On the Capital Budget side, $5 million went to Broadcasting Corporation and some $8.8 million to the Water and Sewerage Corporation. These cost-over runs are partially offset by under-spending on other items.
What is somewhat surprising about the listing, however, is the absence of any additional funding for Bahamasair, which is usually at the head of the line when it comes to government hand-outs. The expenditure items, both recurrent and capital, are largely within the estimates which were earlier approved by Parliament and given the fixed nature of the major items, Personnel Emoluments (wages, salaries, gratuities and pensions) that is not surprising but it is cause for concern in the face of sluggish revenue performance and the historical stance taken by successive governments not to make any major adjustments to staff levels in the public services sector.
The combination of sluggish revenue performance and rigid expenditure levels, which have become hallmarks of government’s budgets, could only lead to continuing deficits; deficits which are invariably financed by further additions to the national debt, which at an unprecedented 56% of GDP, is approaching a threshold that should be of paramount concern to all of us, especially the younger generation who no doubt would have to pay it off sometime in the future.
2/24/2011
thenassauguardian editorial
thenassauguardian editorial
The prime minister and minister of finance has presented to Parliament a statement on the fiscal affairs of the country for the six month period ending 31st December, 2010. It seems clear that the country is still being severely challenged on the fiscal front and the economy has yet to emerge from the depths of the global recession.
The most important budgetary item, total revenue, is trailing estimates by $50 million despite the tax hikes and the improved revenue administration announced at the start of this current budgetary cycle.
That outcome is not surprising when one considers that in our economy, our major source of government revenue is customs duties, which are determined by the level of imports, which in turn is determined by employment levels and tourists arrivals.
Unemployment is in the mid-teens, according to the latest available figures which have not been released since 2009, and air-arrivals — the most important tourist category — is seemingly stagnant at 1.3 million; a figure that has hardly changed in two decades.
From a policy perspective, it seems clear that efforts to boost tourist arrivals (by air) and at the same time expand employment opportunities are of critical importance going forward.
Although the budget statement gave a hint of cautious optimism regarding the outlook for economic growth and development over the short term, it is difficult to overlook the ominous threat to that growth also contained in the statement in reference to the almost 24 percent increase in gas prices at the pump and the 37 percent increase in the surcharge applied by B.E.C. to our electricity bills.
It would appear that the consumer, who continues to buckle under the more than $1 billion in loan arrears at the bank (mostly in mortgages), will continue to face serious financial challenges for the rest of the year.
The mid-term budget permits, among other things, for Parliament to approve by way of a supplementary expenditure Bill any additional funding that is needed for specific line items in the original budget. In this exercise, an additional $10 million was needed for the e-government initiative; $18 million is earmarked for payment to the utility companies; nearly $4 million for the police; and another $4 million for medicine.
On the Capital Budget side, $5 million went to Broadcasting Corporation and some $8.8 million to the Water and Sewerage Corporation. These cost-over runs are partially offset by under-spending on other items.
What is somewhat surprising about the listing, however, is the absence of any additional funding for Bahamasair, which is usually at the head of the line when it comes to government hand-outs. The expenditure items, both recurrent and capital, are largely within the estimates which were earlier approved by Parliament and given the fixed nature of the major items, Personnel Emoluments (wages, salaries, gratuities and pensions) that is not surprising but it is cause for concern in the face of sluggish revenue performance and the historical stance taken by successive governments not to make any major adjustments to staff levels in the public services sector.
The combination of sluggish revenue performance and rigid expenditure levels, which have become hallmarks of government’s budgets, could only lead to continuing deficits; deficits which are invariably financed by further additions to the national debt, which at an unprecedented 56% of GDP, is approaching a threshold that should be of paramount concern to all of us, especially the younger generation who no doubt would have to pay it off sometime in the future.
2/24/2011
thenassauguardian editorial
Subscribe to:
Posts (Atom)