Monday, January 31, 2005

How much more do you want, ASG?

The ASG is at it again. Samoa News reported this today:

ASG agreed with GAO's finding of local government lacking "adequately trained medical, educational, accounting and other professionals" and GAO's reasoning that this "is one of the main causes for deficiencies in the programs and inadequate service delivery" in the American Samoa.

The ASG further claims in the article “that the only way to correct the deficiencies it faces ’is additional funding.’”

I hear someone in the distance coughing, “Bullshit.”

What is the logic in sending more money to a government that cannot keep track of where it goes?

What makes the ASG think that current federal funding would not suffice if the monies went to what they were meant for instead of into politicians’ and their friends’ pockets?

The General Accounting Office (GAO) stated the following in their report:

A shortage of adequately trained professionals, such as accountants and teachers, as well as inadequate facilities and limited local funds hampered service delivery or slowed project completion for many of the grants.

This in no way implies that limited funds are responsible for American Samoa’s severe lack of accountability. In this regard, the GAO stated this in its report:

American Samoa’s failure to complete single audits, federal agencies’ slow reactions to this failure, and instances of theft and fraud limited accountability for the 12 grants to American Samoa.

The ASG needs to keep account of what it’s getting and where those funds are going before crying to mother for more money.

Sunday, January 30, 2005

Obstructing Accountability Results in Lack Thereof

The General Accounting Office (GAO), the investigative arm of Congress, released a report on American Samoa’s level of accountability for key federal grants on Jan 18. These monies paid for the territory’s infrastructure improvements to airports and roads, technical assistance, education programs, nutrition assistance and universal health care. The ASG didn’t fare well. The local government has been condemned as a “high-risk grantee.” It’s about time.

This all comes at a time when the administration and our congressional representative vehemently oppose the Territorial Auditor’s Office (TAO) in reestablishing the Government Comptroller (GC) in American Samoa. George Webster, department head of the TAO, believes that his office lacks the autonomy, funding and powers necessary to carry out his accounting duties and that a GC will be more capable of combating government corruption and abuse.

Taimane Johnson, president of Common Cause, stated in 2004 that not only is the Territory Auditor “understaffed and under budgeted, but he is stymied by uncooperative administration officials who are either afraid or unwilling to provide audit information." According to Samoa News, “Webster wrote an open letter in which he said that there have been several instances where audit requests by the Territorial Audit Office (TAO) have been ‘blocked.’"

Faleomavaega’s opposes Webster’s request of the Department of Interior, which has jurisdiction over American Samoa, on the basis that the TAO attempt “is unwarranted and subverts the efforts of ASG to develop into a fully-functioning, self-governing entity." That will not happen, congressman, if the ASG can’t even keep accountability of federal awards, which according to the GAO, makes up 45 percent of the territory’s operating budget.

The report’s condemnation results from failure on the part of the ASG to conduct its single audit reports for fiscal years 1998-2001 and “instances of theft and fraud,” which have resulted in several convictions in federal courts located in Hawaii. Our congressional representative believes that the TAO has sufficient powers to correct these mistakes and that federal oversight from Office of Insular Affairs provides a “foundation in handling financial management issues" in the territory, which amounts from little to no direct involvement by the Feds. Practically, what Faleomavaega wants is to maintain the status quo, which produced not a single single audit in a three-year period and convictions of four ASG officials for conspiracy to defraud the U.S. government of federal monies. Obviously, the status quo in and of itself warrants the demand for the reestablishment of a GC.

Our congressional representative can take his pleas and his attempts to stir up of feelings of nationalism elsewhere. If the ASG wants less federal involvement in local affairs, then it is only fair that Washington give less federal aid.

Tuesday, January 25, 2005

Samoan Democracy

Aeo’ainuu Aleki touched on a key issue in Monday’s commentary column It was about the selection of senators to the Fono, which has come under criticism lately for not being subject to the people’s vote. Instead, Senators are elected through the fa’asamoa in the district councils. While the article makes plenty of valid points, there is a major misconception.

Aeo’ainuu points out that “the selection of Senate members was not according to a rule of democracy.” While candidates to the Senate are not put on a ballot per se, we shouldn’t rob the fa’asamoa of its own democratic principles. Families elect matai’s who represent their respective clans in the village council. Village councils elect representatives to the district councils, and the district councils elect our senators. If that’s not democracy then I don’t know what is.

Samoa has had a long history of this democracy before European contact was made. Our ancestors also did just as good of a job as America’s founding fathers in limiting centralized power. The kings of old Samoa practically had no political powers within the villages. Every village was considered politically autonomous (still true to this day), and because of this fact, the powers of kings and paramount chiefs over people’s everyday lives were severely limited.

Aeo’ainuu seems to suggest that democracy is a western value and not a Samoan one by saying, “Perhaps, [criticism of the fa’asamoa senate selection process] arises from prejudicial thinking that places Samoan tradition and culture in a subordinate role to western values.” Aeo’ainuu is mistaken as the critics are by not recognizing that Samoan tradition and culture and western values are the same in the sense that they all revolve around democracy as a central theme.

The values of democracy and individual rights do not belong to anyone nor do they originate from a certain hemisphere of this globe. They come from above and they are inherent to every individual. The fa'asamoa has just expressed these values in a different manner and to some extent, a lesser degree. But the same is true of today’s America, where individuals’ and enterprises’ rights and liberties are still being trampled on by government.

What is more important than how senators are elected is ensuring that their powers do not extend beyond their charter granted to them by our constitutions and that their actions do not infringe on the people’s rights.

Sunday, January 23, 2005

Puni gets it Right

In last week Thursday’s Senate confirmation hearing for cabinet nominee’s Puni P. Sewell’s appointment to the Department of Human Resources (DHR), the appointee had to respond to Senate President Lolo M. Moliga’s inquiry about “people who want jobs in government?” Puni explained that there were no job vacancies, but that the department is seeking employment for the applicants in the private sector. In responding further to the senator’s inquiry, he stated that this function being carried out by the DHR “is not good for government, because it is not an employment agency.” He could not be more correct.

Puni’s statement is contrary to the mainstream belief that the government has the duty, responsibility, and capability to seek employment for or even employ all those who apply for government positions. Several letters to the editor in Samoa News expressed this view by demanding that the ASG create jobs for graduates of the American Samoa Community College (ASCC). Even the keynote speaker for the ASCC Fall Graduation, Jean Anderson-Asuega, implied that it is the government’s responsibility to “open opportunities for them.”

The president of the Mackinac Center for Public Policy, Lawrence Reed, said, “Government has nothing to give anybody except what it first takes from somebody.” What many people are proposing when they ask the government to provide more jobs is to either increase taxes or increase the territory’s debt by borrowing more money, which – you guessed it – additional taxes will have to repay.

Puni also testified, “Most didn't want to work for private companies. They want to gain employment with government and that is a fact.” Who could blame them? Government positions are more secure than jobs in the private sector because businesses can not force their customers to buy their services. If a majority in Fono feels that the ASG needs to employ workers to dig holes only for the workers to fill them up again, guess what, you're going to pay for it.

Thursday, January 20, 2005

Rainmaker Renovations will hurt Tourism and Economy

The Fono’s House Loan Bill proposes to authorize the American Samoa Government (ASG) to use public funds to bail out the American Samoa Development Corporation (ASDC) and to renovate the Rainmaker Hotel. The ASG is threading dangerous waters, because this move has serious implications.

It is advisable that the government conducts a study to determine whether the territory’s infrastructure, such as our roads and telecommunications, had more to do with tourism’s decline than an aging Rainmaker did. Such a study will be less expensive than renovating a hotel that is probably less of a factor tourists consider when deciding whether to vacation here or not.

In addition, many people make the mistake that taxes do not fund the loan, and that the loan is solely coming out of monies from settled court cases won by the ASG against various parties. This is partially correct. If the ASG used the funds won from its civil litigations for core government functions, then it would forgo current taxation and fees it collects as revenue for such purposes. Ultimately, the ASG lending of litigation monies is an indirect tax on the people.

The most destructive effect will be on the hotel private sector. If the governor’s plan fails and tourism does not increase by a substantial proportion, the only effect bill 29-2 will have is allowing the ASDC to use public monies to attract current customers away from hotels not equally subsidized by the ASG. Since this subsidy is an indirect tax, the Hudsons, the Halecks and other hotel owners are practically paying the government to support the competition.

What would the ASG do in the event the tuna industry starts to deteriorate? Will they go in with a different version of Bill 29-2, and loan our money to the likes of Starkist and buy out their shareholders? Luckily, those tuna companies far exceed the capacity of the ASG to do either. Clearly, this activity is not the role of government nor should it be its business.

All three branches of the ASG are walking hand in hand in pursuit of this objective. Like many other ASG initiatives, what is starting out as a good intention is likely to have dire consequences.

Sunday, January 16, 2005

The Drug War is a War on the Poor

Last week, the ASG Vice and Narcotics unit raided the home of a 50-year suspect for allegedly possessing marijuana and firearms. The police incarcerated him in the Territorial Correctional Facility to wait for his initial appearance in the District Court. But why should he wait? The police and the public as a whole have already found this man guilty as charged.

Even Pago’s faipule, Muavaefa’atasi, sentenced the suspected drug offender to what could be years in prison when he did not confront commander Sunia about such police activities in his village. He did a great disservice to his constituents by giving the raid the thumbs up.

Last week’s raid demonstrates how much the war on drugs is a war on the poor. Why do the local police not knock down the doors of high ASG officials for defrauding the U.S. Government of federal monies? Why does it take the Feds to keep accountability here and to force the ASG “to do what they have to do to uphold the law” on those with more influence and power?

This uneven handed approach of law enforcement is a weakness of the current administration.

The U.S. Congress came to its senses and repealed the Prohibition back in 1933. Alcohol abuse is bad, but they made a bad situation worse when they made it illegal. Violent crime skyrocketed (Al Capone anyone?) and moderate users filled the courts to receive their sentences. It would have been disgusting to see the ASG raiding people’s homes for the possession of beer and cigarettes while government officials enjoy their wine and champagne.

It is time to consider other ways of handling the drug crisis. (Suggestions to come in later posts)

Tuesday, January 11, 2005

Redistribution will cause more Inflation

If the ASG wants to combat inflation using the FY04 4 million-dollar surplus, the most logical way to do it is to give the surplus back to the people through tax refunds. Of course, the Treasury should calculate refunds in the same manner it took the money in taxes: through percentages. The percentage a person or business paid of the sum of taxes collected in revenue this past year is the percentage of the surplus the person or business should receive in the event of a refund.

The idea is to increase productivity, because an increase in productivity drives prices down. The best way to do this is to give the surplus back to people the ASG took it from, since individuals and individual businesses do a better job of appropriating their monies to their most efficient uses. Any other method amounts to the age-old policy of “taking from Peter to pay Paul.”

Empirical evidence and economic models predict that a re-appropriation of the surplus – called government spending – will increase overall prices. Economic models, in this case aggregate supply and aggregate demand, predict that an increase in government spending will raise prices, everything else remaining constant. That is theory though, and it can get boring explaining it in detail. What is interesting is that empirical evidence of this theory is not far behind or obscure.

The reason an increase in government spending leads to inflation is because production has decreased by the time the government puts its money into the economy. The reason production decreases is because businesses and individuals are discouraged from producing more after taxation. If this was not true then you could tax businesses and people all day, and everyone would be happy. But as the battle over section 936 shows, federal taxation of the canneries will likely shut their productions down. This clearly shows how taxation discourages or even reduces production.

If the ASG uses the surplus to increase government employees’ paychecks, it can expect inflation to rise further. These price rises would normally encourage more businesses to come, but businesses are not stupid. They realize that the money government employees are using to pay for the goods are the taxes the ASG took from them. In essence, businesses are paying for their own goods. The ASG takes from Peter to pay Paul for Paul to pay Peter.

It is clear that after taxation production decreases, and by the time government spends its revenue, the ratio of goods to money levels have fallen, which creates perfect weather for inflation.

Government spending can circumvent these inflationary pressures if funding relies on borrowing money from abroad instead of printing more money or imposing more taxes, and the economy is open to imports. (More on this theory in a later post)

The ASG did pinpoint where our pocketbooks are hurting the most: the price of oil. But it is not the so-called “greedy” Saudis who are causing all of our aches and pains. Again, it all comes down to government taxes. For every gallon of gasoline, the federal government makes 18.4 cents while average state taxes hover around 23.6 cents. Who knows how much the ASG makes on its own cut? If the governor is sincere about lowering inflation because of “the price of oil,” he has approximately 42% to work with.

Sunday, January 09, 2005

Section 936 Tax Incentives Exposes Hypocrisy and Lack of Ideas

It is hypocritical for the governor to petition Uncle Sam to exempt businesses from federal income taxes all the while allowing the ASG Custom Division to collect its own taxes (fees count as taxes as well) on imports coming into the territory. The ASG set a new record this past year with about 25 million dollars collected in revenue. If the governor really wants to “promote other investment and development in American Samoa,” he could start by leaving that 25 million in the private sector.

Without the 25 million dollars in ASG coffers, Togiola will have to cut spending even if it means putting government employees’ jobs at stake. This is, after all, what he is asking of the federal government. If Uncle Sam approves of Section 936, the Fed will forego millions of dollars in revenue collection. As a result, the federal government cannot hire many mainland Americans due to lost of revenue from Section 936.

The ASG can garner support for its cause by demonstrating to American taxpayers that it too can forego some taxation. It can forego taxation by cutting excessive spending on festive activities like Flag Day. It can forego taxation by preventing employees at the Treasury Department from borrowing public monies. It can forego taxation by discontinuing the practice of stately funerals. It can forego taxation by privatizing fat bureaucracies, like the Department of Education and LBJ.

Instead of relying on taxation to support the economy, the people of American Samoa should rely on the growth of the private sector. It does not make any sense to lose money in taxes to the government only for the government to use those taxes to stagnate the growth of the private sector, which is a further loss of money. It’s a lose-lose situation. We have seen economic stagnation when the ASG put limits on interest rates charged for loans under $5000. We see economic stagnation today in the current limits on bus and taxi fares and in ineffective government services –increasingly the police department and for some time, public education.

The governor’s and our congressional representative’s position on Section 936 in the past few days highlights the fact that the ASG is fresh out of ideas when addressing the future of our economy, especially the tuna industry in American Samoa.