Thursday, March 23, 2017

How Bad is Trickle-Down Economics?

What the hell is that? It's a deceptive argument that the economy can grow a lot faster if we keep on reducing the top tax rates. It was first tried by Ronald Reagan in the 1980s and failed miserably. For example the national debt of the US increased from $1 trillion to $4 trillion over a 12-year period. This regressive taxation regime was reveresed as from 1993 when one William Jefferson Clinton won the Presidential elections. And what has been its impact on Mauritius?

It Has Screwed Up Our Economy
Well, you've seen what it has done to our country after Sithanen implemented a pretty barbaric version of it as from 2006 -- the flat tax -- with the blessing of one crypto-socialist. The bottom line is that we ended up with the smallest national cake baked over a five-year period as far back as we can remember and the cake-cutting was pretty bad too. At the end of 2012 there was already a cumulative GDP shortfall of about 275 billion rupees -- that's the GDP of Mauritius for 2008 by the way -- with respect to the promised 8% robust growth trajectory. If we make the very conservative assumption that government would have reduced its revenue collections to 15% of GDP this translates into a revenue shortfall of over 40 billion rupees -- you multiply the last two numbers. 54 billions if it kept its revenue share of GDP at 20%. 

That's a lot of money. For instance the 1,600 kms of leaking pipes that the CWA has to change will cost only 19 billion rupees. So there would have been more than enough money left over to beef up our public utilities and help our friends in Fond du Sac avoid losing everything twice. And do a million other mindful things to push Mauritius forward. PPS would not have been told repeatedly by the NDU or their Ministers of Finance that there is no money. For all these years. Call Services Limited would also have had a much easier time.