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Balancing reality with smoke and mirrors
For the second year in a row, Prime Minister Keith Rowley stood before the nation on Sunday night to deliver what has effectively become his T&T-fashioned “State of the Union” address.
Though lacking the same flair and fire of his American counterpart, the Prime Minister spent more time than necessary in his 45-minute discourse essentially telling the country much of what it already knows.
Yes, Mr Prime Minister, we know the economy is bad.
Yes, Mr Prime Minister, we know energy sector revenues are down (more on this shortly) and that the government has limited room to manoeuvre as a result.|
And finally, yes, Mr Prime Minister we know what you “met” when you and your team entered office in 2015—you’ve reminded us on several occasions over the last 28 months of your term in office.
Sure this can be considered as setting the context but, truthfully, there was no real need for repetition for emphasis. That said, the Prime Minister did, however, do a remarkable job of balancing reality with the smoke and mirrors of politics. The uninitiated in the art of political misdirection might have been ensnared, but fortunately, a few of us are initiated.
In spite of some general perceptions about “inaction” on the part of the Rowley administration, the government has done a fairly decent job of creating somewhat of a soft landing for the T&T economy given the overall circumstances.
The fact that the government has been able to largely avoid massive dislocation in the public service—the largest employer in the country—and that many social and health service subsidies have remained untouched thus providing some relative buffers (if only artificially) for the lower income earners in society, while still being able to shave $11 billion off of fiscal expenditure in the last two year is no easy task.*
Further, the higher taxes levied on banks, casinos and other high-income earners, along with the petroleum royalty and other low-hanging fruit such as the property tax and T&T Revenue Authority prove to be reasonably balanced moves aimed at “sharing the burden” around, and providing some additional income to the state.
Certainly these accomplishments do not imply that the government has achieved them seamlessly. After all, many of the services offered by the State (ie inter-island ferry, public healthcare) remain in shambles and paying outstanding wages to public servants along with other fiscal obligations has proven to be quite a challenge for the government.
But, all in all, the patient has been stabilised. Kudos for that.
Smoke and mirrors
There is, however, a tremendously deceptive aspect to some of the rhetoric of the Prime Minister.
In the first instance, the Prime Minister’s proclivity for listing “development projects completed and/or in progress” is a great example of misdirection for one simple reason: how will these projects, as a form of significant capital expenditure, end up yielding any revenue for the State?
Sadly, many will not or ever. In fact, most will drain the fiscal coffers in the long run. For example, the building of new hospitals, community centres, sporting facilities and police stations may provide some with a “warm and fuzzy” feeling about a “caring” government, but they will require significant maintenance expenditure and given the history of governments maintaining anything in T&T, one can almost predict the outcomes.
Additionally, there seems to be an unhealthy obsession with building things for the sake of simply doing so. Perhaps it would be wiser for the government to simply remedy its current stock of capital assets than to create new ones.
Again, any businessman worth his salt will tell you that capital expenditure should be channelled towards areas that will earn income in the future. Perhaps the government sees this differently.
The other area of smoke and mirrors involves a bit of technical assessment of circumstances in the energy sector. The constant refrain by the prime minister about revenue from the sector “declining by over 90 per cent” is a bit of a ruse. What has taken a sharp hit is the government’s take from Petroleum Profits Tax (PPT), but overall, energy sector revenues (royalties, dividends from NGC, Corp Tax from NGC and Atlantic and production sharing contract transfers to the Ministry of Energy) have not fallen by 90 per cent.
In fact, if one looks at figures on energy sector revenue as published by the Ministry of Finance Budget Division’s Review of the Economy **, a smaller drop is recorded. So while saying a “90 per cent drop in revenues from the energy sector” might make an interesting sound-bite, saying it over and over again doesn’t make it true.
In the final analysis, one can only expect a politician to be a politician after all.
In 2018 however, with issues such as Petrotrin and forex (among others) waiting to be resolved, real tests of political fortitude are more likely to manifest themselves.
*One can argue though, that realistically, the economy should have been functioning at its current $52 billion level of fiscal expenditure and that the additional $11 billion represents an “unnatural state of waste” that could have been easily culled anyway.|
** For 2015; $19 billion
For 2016; $8 billion
For 2017; $9 billion (est.)
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