Sunday, 30 September 2012

One move in the right direction

It’s been a while since leader of the main opposition, Mr Kaczyński, party delivered his inaugural speech in the headquarters of his party (I wanted to follow suit and deliver a speech at home, but my parents declined to listen to it) in which he focused on the economic agenda of his party. The proposals put forward by Mr Kaczyński’s grouping centre around reforming tax code, pro-family policies, turning around the labour market.

The first discussion that sparked off in the wake of the announcement was about the costs of the proposals. The proponents argued the changes would set the state budget back 11 billion zlotys in the first year and then (I infer due to multiplier effects) would bring net revenues to the public purse. The opponents, i.e. ministry of finance pointed out new stimulus package would ruin Poland’s public finances (net extra deficit of 54.5 billion zlotys in 2013 only) and compared to a Ponzi scheme in terms of mismatching inflows and outflows.

Interestingly, none of the arguing parties has bothered to present calculations and underlying assumptions which could back the quoted figures. Actually those calculations have long been forgotten amid the daily bread of political squabbling. Last week I promised to catch up with a coverage of the debate between economists staged by the biggest oppositional party.

The discussion, held on Monday, was attended by over thirty eminent economists, representing a spectre of views and… was a huge letdown for me.

Many people spoke, little has been said. The discussion was full of very general conclusions, discussants have come up with several apt diagnoses, but few proposals how to turn the states of affairs around. OK, I know the tax code is over-complicated and loopholes give room for abuses, tax offices unrelentingly chase down perplexed taxpayers, I know the pension system needs to be revamped and broached this topic several times here, I know the state is not friendly enough towards child-raising families, I know it. It is easy to say what is wrong, the real challenge is to come up with feasible solutions to the problem, not the quick fixes, such as taxing financial institutions and large retailers. Levying a 0.39% tax on financial institutions’ assets and up to 2% tax on turnover of big retail shops means simply passing on this taxes to end customers. Additional (remember those enterprises are regular payers of corporate income tax) tax burden would become a substantial drag on profitability of financial institutions (what is their return on assets?) and retailers (operating on small margins and earning on big volumes of goods sold) and in effect all firms would in unison pass the tax on their customers in form of higher fees and gross margins (difference between revenues and cost of goods sold). And if Mr Kaczyński says competition would hinder such hike, he again proves he is completely out of touch.

Such diminutive is the revenue side in the PiS’ proposal, compared to bloated expenditures. I fear rule of PiS would mean a revisiting flawed economic policies from years 2006 – 2007 when despite economic boom state budget did not run a surplus, as expenditures were raised and taxes were cut. Promising people lower VAT, higher tax allowance for children, labour market kick-starting spending and planning to fund it with additional tax on two types of companies (those hailed as hostile) is, putting it mildly, pure tale-telling. Many voters will fall for it, only few will take the trouble, or be clever enough to make out such plans do not hang together. Poland’s creditors have confidence in the sovereign debt of the country. Yields on 2Y zero-coupon bonds run below 4.2% these days, one percentage point below inter-bank market rates and less than one percentage point above looking-backward inflation. Ruthless speculators do not buy Polish bonds so cheaply because they are in collusion with the worst, hopeless government in the history of Poland. They see our public finances are run prudently, fiscal deficit, although in my opinion excessive, is still moderate and debt / GDP ratio is bound to decline to 50% by 2016. Any silly proposal that would push up the borrowing needs would shatter the excellent perception of Poland as a debtor and this, by any means, must be averted. All in all I am glad the debate was held and that many economists turned up to have their say.

The real pity is that it was a one-day event and soon after Polish politics return to its ordinary course. On Thursday I came home and stared at TV screen watching the parliament session during which deputies were once again dragging out and taking into pieces the Smolensk tragedy. It is unacceptable there was a mess when bodies of crash fatalities were laid into coffins, but why the hell have coffins become a focal point of public discourse? The world does not revolve around those who should rest in peace. In peace, which is disrupted. Let’s face the brutal truth – after the impact at the speed of 280 kmph bodies of fatalities were shattered into pieces, mangled, deformed. Putting this together was a challenge and allowances should have been made for some mistakes.

And again, I want to know what the hell the point in exhumations is. The grave, as I understand is a symbolic place to commemorate a person who is buried, a place that should serve as a symbol and the issue whose decomposing cadaver lies there is of secondary importance (if my opinion winds you up, feel free to express this). By making politics on Smolensk disaster fatalities’ grave we do not give ourselves the chance to move Poland ahead.

Wallowing in the mire of past events will not make most of us feel better. In fact most people focus on down-to-earth issues and I would prefer politicians to focus on public finances, pension system, health service, in a word on the future of us. This should make the news, not rooting about in coffins or rallies of self-styled catholics, who feed on hatred towards fellow men. They invoke teachings of John Paul II who said ‘there is no solidarity without love, solidarity is when people stand together, not against one another’. How does it square with the amount of mutual loathing in our society?

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