The Golden Goose
Life is not a fairy tale but for generations, old time
folklore and fairytales have been used to teach valuable morals and lessons to
our children. Take for example, the fairy tale trope of ,“The Goose that Laid
the Golden Eggs.” I don’t know if its
still a favorite, as I can’t remember telling the story to my kids. At any
rate, a farmer and his wife had a goose that laid a golden egg every day. This
is obviously everyone’s favorite part of the story as it is often referred to
metaphorically.
We could take a lesson from the Farmer and his wife when we
look at the state of the Territory’s economy.
For sake of argument, let’s refer to jobs or job creation as “the Golden
Eggs” and those that produce jobs as “the Goose”. It doesn’t take long to see where this story
is going. Every year our elected leaders and officials spend a considerable
amount of time discussing how to create and protect government jobs. However, what many seem to forget is that the
private sector are the ones that make a large number of these jobs/eggs possible in the first place.
The first thing we have to remember is that the private
sector is the sponsor that makes it all possible. In fact, the private sector
creates significantly more eggs (some
would argue all) than the government. It is important to note that on average, government employees earn more, they traditionally have better healthcare
coverage and retirement plans than private sector workers. But it is imperative
that we note that 30% of the island works for the government. However, there is another
whopping 70% of our citizens that do not and actually work for the private
sector.
That being said, it shouldn’t take a rocket scientist to
conclude that we need to be dedicating a significant amount of time exploring how
we are going to nurture the goose because it is evident that it is dying. If
you don’t believe the goose is dying, the following are several indicators that
should make this a reality for you:
(1) Our
main industry’s outlook, tourism, is flat. We can debate about this but at the
end of the day with the opening of Cuba, lack of air transport and shrinking
capacity for overnight rooms, we have a problem. Even if you don’t think we do
you, have to admit it is highly unlikely that we can increase our arrival rate
to a point that would eliminate our budget woes overnight.
(2) Unemployment
is conservatively at 11% and probably at 16%. The goose can't lay any eggs
because it is not getting fed.
(3) Our
GDP is predicted to grow by less than 1% for the next 5 years. The current plan is to fund government
capital projects that have no potential revenue.
People WAKE UP! It is time to feed the goose. The priority
should be how do we grow the private sector.
By growing the private sector, we by default, will increase government revenue
. It is no secret that income tax is the
single largest revenue source of the Territory. This figure has shrunk by $100
million dollars over the past 10 years. We have lost $200 million in salaries. Take a minute to contemplate
that. If we divided that by the average salary of about $40,000 (I’m being
generous) that’s 5000 jobs. We have a lot of work to do and the increase in job
and job creation cannot start in the government. Relying on the government to create jobs is a
fallacy that will only add to the tax burden and the “structural
deficit” instead of reducing it.
Jobs are not only important to the people that hold them but
also to the government that benefits from the taxes they generate. The latest
plan by the current administration calls for 4 new taxes and an increase on 3
taxes. This will not help us, doing so we are overtly preparing the goose for
slaughter, thinking that there is more gold in the inside. At the end of the day, the only way we shrink
the constantly reoccurring budget deficit is to build and create a new, more
robust and diverse private sector.
We have to bring in new revenue to the economy by reducing
regulation, decreasing taxes connected to hiring and employment, allowing for access to capital as well as
creating more turns in our sales. Every time something is sold in the Virgin
Islands, the government gets 5%. If we tax more, the result is less consumption
resulting in fewer sales. The more we encourage local trade, the more we
collect.
The idea of federal bail out, applying for grants and
increased government spending are all 20th century economic schemes
that have played their course unsuccessfully. In the 21st century
the only proven way to win the challenge of sustaining a healthy economic
infrastructure is with skilled workers, attractive tax incentives and
government flexibility and competitiveness. Leveraging our resources to create
new inflows of capital instead of new ways to squeeze it out of the goose that
has delivered for us in the past is not the way to go.
My readers, I leave you with this: if there are so many things we can do to give our private sector
development a chance to expand, why is our current administration spending so
much time trying to kill the goose.
