Tuesday, November 08, 2016

Plenty to Learn From US Election Process

Americans know pretty much what to expect from the person they will elect as President of the world's second largest economy today. And that's thanks in no small measure to the candidates thoroughly discussing the main planks of their plans and to several independent groups of people scrutinising them. If it's Trump they are aware that the extreme version of trickle-down economics he's proposing – a flat tax of 15% – would add 5 trillion dollars to the US national debt, make 3.5 million people lose their jobs and potentially throw the economy into a recession. If it's Clinton the economy should keep on growing from the middle out and that too without a Great Wall that Mexico would be made to pay for. The fiscal policies of these candidates are also consistent with the DNA of their parties: Democrats don't believe and rightly so that tax cuts for the wealthy work while the Republicans do.

It has not been different for the Mauritius Labour Party which has quite a bit in common with the Democratic Party. Well at least till 2006 when it started implementing what Trump is planning to do if he wins: go for a 15% flat tax or remove the progressiveness in the tax structure. The worst part of it is that such a dramatic policy change – elections in Germany have been lost and won over the single issue of price stability – wasn't discussed let alone mentioned during the election campaign of 2005. No trace of trickle-down economics in the manifesto entitled "Une ile Maurice pour tous" either. The LP did use the Putting People First slogan though. Funnily enough that was crafted by the Bill Clinton campaign on their way to rescue the American economy as from January 1993 from 12 years of voodoo economics.

So voters in America could definitely learn from our experience with a 15% flat tax or if you will a Sithanized version of trickle-down economics: debt has increased by 129 billion rupees over the last 10 years, 2016 will be the 6th year that we'll be clipping an unsustainable low growth rate of under 4%, more than 17% of the poor people in Mauritius were thrown into poverty within the first five years of the tax cuts for the wealthy and a cumulative GDP shortfall of over 900 billion rupees will have accumulated by the end of this year. Incidentally if we use the estimate of Business Mauritius that our private sector generates 80% of GDP then that's 720 billion rupees more it should have produced over the last decade. Likewise Government should have generated an extra 180 billion rupees.

It is these toxic dynamics that have played a big role in the LP losing power in 2014. And it's definitely been surreal to see the Socialist International logo at their rallies since then. Though it's not any worse than the main party of Lepep – which has an equally interesting middle name – not showing more common fiscal sense than it did over the past two years.

2 comments:

akagugo said...

And Trump has campaigned over the implementation of trade restriction which is essentially what Brazil experimented with Rousseff's policies some years ago and is now paying the price.

Sanjay Jagatsingh said...

French voters know where their candidates stand. We should have something like this in Mauritius for our next elections.