Thursday, February 09, 2006

Budget debate

I wrote earlier about the house finance committee and the problems that arose on electing the chairman of the committee. Well, new elections were conducted so that Hashem Dabbas could be installed as the chair, over the objections of the deputy who had originally won. While it is the prerogative of the permanent committee of the house to do this, it was highly irregular.

Anyway, the finance committee did its job, making 23 recommendations to the full house. These recommendations include shaving 90 million dinars (3 % of the budget) off of money earmarked to fund NA projects. In return, the committee recommended increasing salaries for the public and private sector, and increasing taxes on cell phone calls. Other recommendations included restricting tenders to Jordanian contractors (who can't compete in cost, or else this recommendation wouldn't be necessary), moving forward with the Disi project, and reconsidering vocational training programs. Don't ask me what these recommendations have to do with the budget, because I don't know.

The budget is suffering from rising oil prices and a drop in foreign assistance. To compensate, the government want to cut subsidies and raise taxes. According to the finance minister, the rejection of the income tax law will not affect the 2006 budget.

In fact, collecting or saving a few tens of millions of dinars here or there really ignores the elephant in the room. 42% of the budget goes to pay an over inflated bureaucracy. The finance committee obliquely referred to this when it refers to "vertical and horizontal expansion of the government, and working to merge agencies with similar mandates in order to reach higher levels of achievement". Abderahim Malhas said it very well yesterday, saying that the creation of fake jobs and fake organizations is a form of influence buying, which is not needed and which we can't afford.

The only way to fix the budget it to reconsider the big ticket items that are eating away at our resources with nothing to show for them. These are subsidies for oil and our over inflated government. It is clear that the subsidies are going to be phased out. The government is too afraid to consider cutting its workforce. As Malhas says, this is because many of these employees are appointed to buy loyalty, and not because the government needs them. Even plans to restructure the government emphasize that no employee will be laid off, but some will be retrained and rehabilitated. Give me a break. If an employee is lazy and/or incompetent, fire him or her. Retraining is useful for good employees, not for bad ones. The NAC is eager to give this right to private sector employers. Why not give it to the government?

As it is, the lack of real accountability for government employees encourages laziness and complacency. Various governments over the years have pushed for more liberalization of the economy, including a wide ranging privatization program. They have failed to take it to the final step, which is to reduce the size of the government and reduce the tax burden, creating a leaner and meaner work force.

According to the same philosophy of liberalization, it is necessary to reduce taxes in order to stimulate the economy and create jobs. Trying to shift the tax burden to the poor and the middle class will simply not create the resources needed to keep the budget in a healthy state. The only answer is to cut deeply into the fat of government bureaucracy.

If you expect a discussion on these lines in parliament, I have one word for you. Ha.

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