A good lesson in free market economics was my
professor’s story about a hundred workers chopping down a tree with sticks.
Along comes someone with a knife, and then the question now becomes whether
keeping the workers employed is more important than introducing a sharp metal
object that would empower one man to do the job of a
Governor’s budget proposal attempts to swing a hundred sticks without much in
the way of lumber production. That is the point after all. The Governor believes
government "continues to be a safe haven" for employment, while the Treasurer
refers to the ASG payroll as his "top priority". It's a failure of leadership to
not introduce a knife to this budget.
semi-autonomous agencies have followed in lockstep. The only restraint on their
personnel costs has been the ASG’s inability to meets its subsidy
obligations. Their only sense and purpose of profit is continual bureaucratic
tax revenue is expected to decline. Overall tax collection looks to be $800k
less than FY11. FY10 income tax collection is a whole $2 million more than what
they expect to collect next fiscal year, largely attributed to the federal funds
that followed into the territory following the tsunami. The Governor 2% wage tax
increase can only account for a projected $600k increase from FY11 to 12, and
that’s if the ASG is lucky.
The economy went from bad to worse since FY10,
and that’s just the point. The worse the local economy gets, the worse tax
collection becomes – no matter how much you raise rates. And economists argue
that raising those rates would only discourage the economy even
we distribute next year’s projected number of locally funded ASG workers through
Mrs. Langford’s breakdown of the current workforce and average salaries, it will
take all $46.5 million in projected tax revenue to cover their payroll. In
exchange, other needs such as repairs for elementary schools, expansion of the
prison facility, simple road repairs, hospital referrals, etc. go
That is the fallacy of maximum employment as an
economical goal. Think of the worker with the knife who displaces the hundred
using sticks. Employment in the short-term may be hampered, but his production
now allows more lumber for the displaced workers to make homes, furniture, paper
and all sorts of products made out of wood.
hide or deny the current economics that portend a national trend towards
austerity. We need to consider reforms already out there to get ahead of game
locally. Like tying the local workforce to 5% less than what’s projected to be
collected or shifting emphasis of revenue collection from taxation (currently
70%) to fees and charges for service (11%).
Heritage Foundation found that the most
prosperous countries are the most economically free. Their “Index of Economic
Freedom” evaluates how much of a country’s government spending is a percentage
of its GDP. In their view, “excessive government spending runs a great risk of
crowding out private consumption, thereby thwarting the choices of
Kong’s (ranked #1) government spending is only 18% of its GDP while American
Samoa (whose GDP was $537 million in 2007 according to the BEA) is looking to
spend close to 90% with the Governor's budget proposal.
We can see
which country is benefiting more using a knife rather than sticks.