Jamaicans were jolted last Thursday afternoon in the midst of their Christmas shopping, party-planning and merriment by the announcements of tough tax measures and a public-sector wage freeze for two years. Opposition Finance Spokesman Omar Davies bitingly dubbed it the Government's third Budget presentation in only eight months.

I don't like what I am seeing down the road. Using the same text from the book of Proverbs cited by both Finance Minister Audley Shaw and Omar Davies - "the prudent see danger and seek refuge" - there won't be many people around who will find refuge from what is to come. The low social capital impediment to growth that I have been writing ceaselessly about for years will be painfully evident in the weeks and months to come.

Jamaicans are absolutely ill-prepared for this period of increased social crisis and, if this period is not managed well, it could well go down as one of our most traumatic in history. As I have always maintained, logic, rationality and reasoned argumentation will be a poor match to unbridled anger, bitterness, resentment and opportunism which are likely to be unleashed in the face of the bitter pill which has to be swallowed with this International Monetary Fund (IMF) meal. Emotions will generally trump reason.

The case made by the prime minister and minister of finance for the necessity of raising taxes and cutting expenditure to contain our albatross of debt is flawless. Shaw's citing of the country's debt-service payments as a percentage of total revenue from the 1990/91 fiscal year to the present was sobering. It has been largely over 100 per cent since 1999 and is now 103 per cent.

Anyone who studies the Jamaican economy concedes that our biggest, most intractable problem is our high debt-to-GDP ratio (130 per cent). Every report from the World Bank and the IMF since the 1990s highlighted this as a debilitating factor.

greatest problem

All the financial analysts in Jamaica, including those who support the People's National Party, admit hat the debt burden is our greatest problem. Omar Davies agrees too.

The two parties are firm and unflinching that the country should not repudiate its debt, but must honour it at all costs. As I pointed out last week, the bulk of the Government's budget goes to pay only two line items: the debt and government salaries and emoluments. Precious little is left to do anything else.

If both parties agree that you can't risk the displeasure of the international capitalist class by renouncing your debt, then you would have to displease other interests to solve your fiscal crisis. If the Government drastically cuts public-sector employment, or even, as it has announced, imposed a wage freeze, the Opposition is not likely to be in favour of this, for many people will suffer. Yet, the PNP agrees something must be done to reduce the debt and have a sustainable debt-management strategy.

social programmes

Some $325 billion of a total of $561 billion goes for debt servicing. If you signalled to the market that you are not able to fulfil those obligations, that would release substantial amounts of funds for the poor and dispossessed. But most know that this would be a foolhardy and suicidal thing to do in our context as a country small enough to fail, unlike big Argentina. So that's out of everyone's books except my John the Baptist friend Lloyd D'Aguilar's, a dyed-in-the-wool Marxist.

If the Government slashed social programmes like free health care and tuition fees, the poor would suffer. Though, disappointingly, a progressive party like the PNP has been pushing the Government to abandon the no-user-fee policy, saying it is just unaffordable, it is a good thing the Government has kept this programme and a good thing that the IMF has, indeed, changed to now accommodate social protection policies.

If the Government does not repudiate the debt, drastically cuts public-sector jobs in a few months (it cost $150 billion to maintain the bureaucracy) or cut many programmes which benefit the poor, then the only alternative in the short term is to raise taxes.

Both the global and our home-grown crisis have forced this drastic decision on us. But there is still an issue to discuss and my sense is that the issue which is the most potentially explosive: It is the issue of equity. I predict that the class card is going to become a favourite in our political game. Pitting the working and middle classes against the rich worked for Barack Obama in the US elections and it could well work marvellously here for the PNP.

The issue of why the banks, which have been making strong profits, have not been taxed or why those holding government paper have not been asked to sacrifice something in the national interest will be the primary issue that the Government will have to answer. I think I know the arguments fairly well on both sides and they need to be fully debated and ventilated.

What I appreciate about the Opposition is that it is prepared to offer alternatives, not just criticise and grandstand. Omar Davies made concrete recommendations in his Budget presentation in April and he has continued to do that.

The PNP Youth Organisation, in its release last week, also set out alternatives that the Government could take in to deal with its fiscal crisis. This is very good and healthy for our democracy. The Government will have to convince the people as to why it chose not to tax the rich more and ease more pressure on the poor. While it is true that the PNP can opportunistically and viscerally exploit this issue for polemical effect, one has to concede that there is an issue to debate as to whether the tax increases are equitable and whether the better-off in the society could have borne more.

I did not get to hear the opposition leader's presentation, but Omar Davies, as usual, was forceful and well-reasoned in his response to the Government's presentations. I believe he made too much, however, of the point that the Government did not set its taxation measures in the context of any broad economic framework. I don't know that the Government needed to have done that last Thursday evening. The fact of the matter is that there is little wiggle room anyway and the market understands that whatever is good for the IMF is good for them, so once the Government gets the okay from the IMF, the market will accept that.

targets

As to whether the market will show confidence is something else - but that has nothing to do with Government's failure to give more details last Thursday.

So many times finance ministers have come with targets, broad framework, etc., and they mean nothing. Targets are frequently missed anyway. The minister of finance did talk about the fiscal responsibility framework which will be enshrined in law and which will bring the confidence that the market seeks. Also, the prime minister has already made it clear that the IMF targets have to be adhered to strictly. So Omar's concerns about economic framework are misplaced.

Now more than ever is there the need for public debates between the Government and the Opposition. We must have a conversation about how we are going to get this country from under its mountain of debt. We must discuss how the various classes will share in that burden and what kind of social partnership we need. And let me ask: If we were to elect the PNP in the new year, would it be able to get a better IMF agreement?

Do we really believe that it's just a matter of who is the financial secretary, who is the governor of the Bank of Jamaica, how competent the technical team is at Heroes Circle - and who is the minister of finance? I am not discounting the importance of expertise. (You know I would be the last one to do that!)

But I am saying we must not trivialise our grave and gargantuan economic dilemmas. We must not give poor people, overwhelmed by their anger and understandable sense of frustration, disillusionment and hopelessness, a false sense of security with pied-piper fantasies that any one party has all the answers. It will backfire. The JLP unrealistically built up people's expectations and unfairly criticised the PNP in the last election campaign. People bought the propaganda line and now they are in the mood of crucifixion at Christmas!

economic promises

My firm belief, following economic issues as closely as I do and knowing the constraints to Third-World development is that even without a global financial crisis, the JLP would not be able to deliver on a number of the economic promises it made. When will our politicians come straight with the people? When will they stop exploiting people's ignorance and their pain?

Let not the PNP have any glee over the joyless Christmas that the Government is having. The problem is not a JLP one. It is a national one. For a people whose chests are so high, to put it colloquially; for people who are so ambitious, and who love to "step up inna life"; a people who love bling and see life almost totally in terms of upward mobility, how will they contain their frustrations over the contraction and compression which their pockets and this economy will experience?

How will public-sector workers be motivated to go to work and give their best when they know that with all the increases and hardships coming, they will not get any increase in not just one but two years? When a 2004 World Bank country report on Jamaica says that Jamaica has lost about 80 per cent of its tertiary-trained graduates to migration, how will these tough tax measures inspire more young people to find Jamaica the place to "live, work and raise their families"?

It's good the Government has protected the very poor. But it's those who are not desperately poor but who want to step up; it is these large numbers of persons whose frustrations and anger we will have to pray about. If you know what I mean.

Ian Boyne is a veteran journalist. Feedback may be sent to ianboyne1@yahoo.com or columns@gleanerjm.com.