The 2005-2006 Budget....

[la déesse de ruine]

So people yesterday Manning unveiled his new budget...what do you guys think? Will it make any difference to your lives?

Basically his idea was to take from the rich and give to the poor...free tertiary education, expanding education on the whole, less income tax...etc are just a few of his plans...

But i have a feeling that there are going to be some aspects of the business community that are not going to welcome some exemptions with open arms...we'll see

Anyway if you have any views, share them an let me know definitely how this affects you.

[TriniXaeno]

yeah, few good things last forever but that shouldn't stop us from enjoying it now while we can!

Let a few thousand get some degrees. Nice up the scene.

The real "yaye!!" for me comes from the tax breaks.

Serious impact on my take home salary right thurr.

I love you Budget 2006!!

GLs could also rejoice since small business gettin a tax break too.

High oil price iwmc!!

[SideSwipe]

It's a very good budget - on the surface. Election budget up we tail if you ask me, but that's for a different discussion. Let's see here now.

On the plus side, we have free tertiary education at public institutions. It today seems as though they may expand this to include private institutes as well such as ROYTEC, SCBS and SAMS. We also have a revamped tax system with a personal allowance of $60,000 across the board. Massive transport system building including the "Western Freeway" into Chaguramas, a highway between San Fernando and Princess Town, the Uriah Buttler/Churchill Roosevelt highways interchange, and beginning reintroduction of the rail system.

This is all very well and good, and I welcome these measures...however I must also say - this is an easy way to blindside people who do not take a close look at the social and economic impacts of these measures. Aside from a marginal increase in gas prices, I do not see any way to absorb the extra disposable income that every working person will now have available. I am also dissappointed that there seems to be very little emphasis on diversifying the economy.

The current boom we are riding will not last forever. Yes, the budget is based on a US$45 per barrel oil price, and yes we have crossed $60 with up to $80 expected next year. I hope the surplus is used wisely; placed into the heritage and stabilization funds. However, prices can only keep rising for as long as the global market can sustain it. I fear that after we cross $100 per barrel, it will just be a matter of time until the market crashes. What then? Crappaud smoke we pipe, that's what. This is why we must be diversifying the economy now, while we have the money to do it. I would have certainly liked to see some diversification planned in this budget.

Free education for all. Kudos. However, do we have the mechanism in place to deal with it? This was a project scheduled for 2008, and while I myself am a student, I believe it should have waited until 2008. To my knowledge, the UTT campus at Wallerfield is nowhere near complete. UWI is operating at past optimum capacity. Where will the extra influx of students go? And, once they graduate, where will they all work? This is another reason why we need to diversify. So good move, but a bit rushed as I do not feel we can properly deal with the extra student influx at the current time.

As for road construction, I welcome it. We need that interchange, and I hope that more will be constructed along the East/West corridor so traffic can flow freely right down the line. The interchange is just moving the bottleneck, the other traffic lights must be removed as well. I understand Princess Town traffic is very bad, so good job. The Western Freeway and the rail...definately needed.

Now on to my major gripe. We have a revised tax system that leaves more disposable income in the hands of the populace. Additionally, tertiary education is now paid for. What this results in is excess money in the market, and as such excess buying by the people. People will now purchase more cars, they will buy building materials and renovate their homes, they will purchase more luxury foods and household items, they will frequent the clubs and cinemas more frequently. For those who have not done any economics, this means an excess in demand for a limited supply, and so prices rise. We therefore have a high inflation rate.

Inflation is not a good thing, especially if salaries don't go up as well. This is why teachers were once holding well paying jobs and then in the 90's found they couldn't pay their bills. Inflation smacked them in the face. Inflation is inevitable, but any government as part of managing the economy is supposed to keep this inflation to a minimum. While extra money in people's hands is a good thing in the short term, it is bad for the economy as a whole in the long term. For every move where you place more money in people's hands, you need to devise a way to reabsorb it.

Perhaps the revamped tax system should have been devised in such a way so as to tax the poor less but leave the middle class alone. There is no doubt that we need to increase the standard of living, but we should also do it gradually and with measures in place so as to avoid too high inflation. This is a very sweet budget on the surface, but there will be hell to pay for it in the long term.

That's all for now...if anyone wants a copy of the budget, it can be downloaded in pdf format from this location:
http://www.gov.tt/news/news_article.asp?id=3780

[la déesse de ruine]

SideSwipe...you have put forward some really good points...it seems that this budget is full of promises without any plans as to how to implement it.  I am definitely worried about the effects of these changes especially inflation. 

Basically what Manning did was present his election budget...as usual...it seems all well and good now but wait til next year.

[SideSwipe]

Yes, however I must also say that not everything about the budget is a bad thing. Armed helicopters and more coast guard vessels will be good for locking down the drug trade, and 149 new police vehicles(I hope they're not all administrative vehicles) will help with increased police presence,a nd requesting aid from the FBI and Scotland Yard can be effective if their capacity is just one of advising what to reform in the service to modernise it, rather than doing the local policemen's jobs for them.

Lower taxation business is a good thing, because with less tax, the business will try to grow more, and so in the long run pay more tax anyway...so this is a good way of encouraging growth of the business sector and making up for the lower tax rate at the same time. More fast ferries on the sea bridge and a complete reforming of BWIA are welcome steps.

I just fear that they have tried to give people too much of what they want. When the average persons ays they want more money, they don't really consider the long term economic impacts of it. This budget seems to be of the mindset that "we have the money right now, so let's just give them what they want so they like us" without considering the long term implications.

You can give people more money...more spending power, yes. But in doing so you need to find ways that they don't engage in runaway spending and send inflation up.

[TriniXaeno]

No doubt that things can get complicated.

But I am in it for the jersey (old election joke)

Basically, it means the short term benefit that you can tangibly appreciate.

In this case, considerably more spending money at the end of the month, thanks to the Middle Income tax break!

More money, less problems.

They would struggle with all the complex issues regardless of whether I got my jersey or not. So why deny me that!?

Give me my bligh and hopefully they will find a way to improve all the other areas with the tons of extra money on hand. I am sure the majority of the general populace and businessmen will be less "fretful" with fatter wallets come 2006.

[SPK]

..the question is, will that extra $5 in your wallet matter at the end of the month if the cost of basic necessities goes an extra $50 for every month?

[TriniXaeno]

if only it were $5.00

but in this case, we are talking a difference of $1000+ a month more spending money thanks to the tax break. Even if you aren't working to enjoy this benefit, I am sure Mommy and Daddy will be smiling!

and necessities can't rise in price to offset such a huge increase in disposable income even with run away inflation.

On top of that, necessities won't see any major increase in demand as a result of this.

If you get an extra $1000.00 you aren't gonna run out and buy more bread and salt now are you?

No sir.

You're gonna get an Xbox 360, mp3 player or take out a new car.

The demand for those sort of things will go through the roof. As a result, the only items likely to jump in price anytime soon with such a glut of $$ are luxury items.

[SPK]

...Baego, u missing the point entirely!!!

I'm not literally talking about an extra $5 a month u know, learn how metaphors work first.

The fact is, with extra cash in circulation, there's going to be a case of inflation.

Soon enough, you will see basic supplies go up. It may be a gradual increase, but it will add up in the long run.

And u don't think the price in neccesities will rise? How u think a lot of those items get here? Sugar is imported, flour is imported, a lot of the basic stuff is imported. They aren't manufactured here, and with oil floating higher than after smoking a bundle of 5-pieces, all of those manufacturing and transport costs will rise soon enough. Who do u think will feel the brunt of that extra cost?

It's only a matter of time before this tax break would be meaningless u know.


And no, my mommy and daddy won't be smiling, cuz they don't work here, so they don't have to pay taxes in the first place!

[SideSwipe]

Even basic necessities follow the laws of supply and demand. Where there is excess demand, prices increase. What is a basic necessity to you and I is a luxury good to someone living on the poverty line. So even what we deem basic will fall into higher demand and increase in price. But imagine life without luxury items. You may be able to enjoy it right now, but in a couple years, this may not be the case.

Look at teachers. Teachers were once well paid, because of the cost of living at the time. However, their salaries remained constant and inflation hit, sending the cost of living sky high. In the 90's, they no longer had good salaries; in fact they were so badly paid they could barely afford to pay bills.

This is the reality we will be facing in a few years because of lack of control over inflation. The little extras people can look at now, and more so next year such as changing a car every couple years, upgrading the computer every time the next great video card or cpu comes out, packing up and heading abroad for vacation every so often, even buying some expensive snacks to munch on late at night. We'll have to say goodbye to all that. It will be the 80's all over again.

While it is all well and good to give extra spending money to the middle class, you need a mechanism to absorb the money back into the system. The budget should have been designed to give the poor a break but leaving the middle and upper classes as they are now. Next year you may be able to afford to buy each of the next generation game consoles because of the breaks in the budget. However, when the following generation is released a couple years down the line...we may not be able to buy even one. Next year you may be able to buy a new X-Trail. 5 years from now you may have to struggle to buy a foreign used Sentra. Consider that.

[TriniXaeno]

no

You guys are missing the point.

If you did even the most basic of economic course you'd understand that certain items are relatively flat lined in turn of demand against disposable income.

Salt and Bread are such items.

You DO NOT BUY MORE IF YOU HAVE MORE MONEY!

That means the demand does not change and therefore the price does not change.

However they are produced/arrive to market are not important.

Those are external factors and do not have anything to do with the tax break. If high oil prices raises the cost of production, then giving me a tax break or not won't change that. Infact, giving me the tax break ensures that I can still afford luxury items even if there is significant inflation!

That means more fun in the sun!

Lemme give you it in a simple example.

2005

Baego:
Salary of $50,000.00
Tax: 20,000.00
Spending Money: $30,000.00
Buys 10 bread at $1000.00
Buys 1 XBOX

Chemooks Bakery: Cost of Operation: $1,000,000 a month


2006

Baego
Salary of $50,000.00
Tax of $0.00
Spending Money: $50,000.00
Buys 10 bread at $1200.00
Buys XBOX 360, PS3 and GameCube Revolution

Chemook Bakery: Cost of Operation $1,200,000.00

Now you see?

Even though there was some rise in the cost of necessities, I was still able to afford them and still have extra money to buy all the next gen consoles!

woohoo!

Also, the nice thing about such changes in the economy is that they are gradual.

After we enjoy this wonderful short term windfall of oil money, prices may stabilise and taxes maybe reinstated.

Nothing this good will last forever. So just think of it as a christmas bonus that lasts 5 years!!

sweet!

You should check out the scene in Guadeloupe. Little caribbean island, smaller than Trinidad and everyone lives pretty damn well!

Consoles galore, cars galore. Trick is, government gives 'em money like whoa. Sure, things are expensive, but guess what? EVERYONE CAN STILL AFFORD IT CAUSE THEY GOT SO MUCH MONEY! lol

[suzieboy]

Now on to my major gripe. We have a revised tax system that leaves more disposable income in the hands of the populace. Additionally, tertiary education is now paid for. What this results in is excess money in the market, and as such excess buying by the people. People will now purchase more cars, they will buy building materials and renovate their homes, they will purchase more luxury foods and household items, they will frequent the clubs and cinemas more frequently. For those who have not done any economics, this means an excess in demand for a limited supply, and so prices rise. We therefore have a high inflation rate.

(Gr8 insight SideSwipe..... Chakura 4 u!!)
Inflation iwmc...!!This is important and could happen which could affect our Purchasing Power.....
"I recommend people to download the budget pdf and take a look see.."

But what are your toughts of the budget as it relates to Security and CRIME.....was it or wasnt it fully covered in the budget???

[TriniXaeno]

Does anyone know what is the current rate of inflation by the way?

Lemme hear the last figure posted.

1%? 3%? 5%?

[SideSwipe]

Hm I am doing an economics module at the moment actually :p

The thing is that items are only flatlined to a certain extent. When you have inflation, all segments of the market increase in price, because every market is in some way linked to another. Minor inflation you will have some items flatlined, however in a case of large scale inflation, this is not the case. Look at any commodity. The cost today is higher than it was in say the 70's or even the 80's, and this is because of inflation. It is inevitable yes, but it is also something that must be managed so that you don't turn the middle class poor over the long term.

I return to what I said before about luxury goods and basic necessities. What is basic to us, chances are in many cases we could do without something quite as expensive. Our luxury is another man's necessity, just as yet another man's necessity is our luxury. This item could just be a different brand or a more expensive kind of the same product. Over the next few years, you and I may not feel the pinch(we will a little further down the line though), but the man who is living on the brink of poverty will definately feel the rise in the cost of living. $60,000 per year is not representative of many people's incomes. A great many work for below that figure. $60,000 is equivalent to $5,000 per month, a figure many fall short of.

Considering that it is not a marginal increase in money flowing through the market, but a significant increase(remember, personal allowance is up from 25,000 to 60,000 for every working person), and there is little to no real means of reabsorbing the money(except for a very marginal increase in the price of gas), we can expect some serious inflation.

Over the short term things will be just fine. Over the long term, after inflation has hit and been in effect for a couple years, 60,000 will not be enough to get by. You will find yourself purchasing those basic flatlined necessities, because you won't be able to purchase other goods that went from being everyday goods to luxury goods thanks to inflation. And over the years, even those so-called flatlined items will increase, slowly but surely.

But what are your toughts of the budget as it relates to Security and CRIME.....was it or wasnt it fully covered in the budget???

Security and crime...I think there were steps taken in the right direction, but I do not think enough was done. Security-wise, we have more coast guard vessels, radar and armed helicopters. That's fine - as for crime, the government wants to go to the FBI and Scotland Yard for help. However, the most they can do is give advice on what steps should be taken regarding bringing our police force up to date. They want more police vehicles and outposts, well okay fine, we have more presence. However, what needs to be done goes quite beyond that. One problem we have is social divide. Perhaps this is one reason for giving more money to everyone. Give people more money and as such deter them from a life of crime...however, as outlined above this has long term repercussions that would only make a greater poverty situation as salaries remain constant in the face of inflation.

Our entire police force needs an overhaul. There are far too many corrupt and just plain useless people in the force, and I'm not sure how this can be handled budget-wise. The police reform bills to give the commissioner more hiring/firing power is one step in the right direction. We need security cameras in crime prone areas. Perhaps we can use bulletin boards on the highways notifying of getaway car license plates and the like(this may require passing of new bills). We need more neighbourhood watches, and not just more vehicles but actually putting them on patrol in known hotspots.

With that in mind, I don't really have a lot to say regarding the budget aspect of crime. I don't think it was fully covered, but I think some effort was made. I don't think it will have any major effect as the police service is still inefficient and corrupt. And, while education and tax reduction to give people more money may divert some violent crime, it won't help much if over the long run it makes matters worse. It's all tied together, so it seems to be a short term solution to something that requires long term planning.

Our crime situation is due mostly to our own mentality. We ignore the problem until it is too late, and we prefer to just wait and see how things turn out instead of insisting something be done.


Baego: According to the CIA World Factbook, our inflation rate was 3.3% in 2004. We have enjoyed a low inflation rate over the last few years, however if you examine our history, we contained inflation in the early 90's by floating our dollar resulting in a devaluation. Letting so much extra money into the market could lead to such a jump in inflation that we may need to devalue yet again. This will make purchasing foreign products, especially the electronics we have come to love so much, that much more expensive. We have managed to keep a low inflation over the last few years. I fear this may end soon, resulting in the shift in standard of living that took place from the 70's oil boom to the 90's collapse, as we were no longer able to sustain what we had going in the loss of oil revenue. Government subsidies, free education and the like...can only last as long as the oil industry booms.

Yet another reason why we need to diversify. With oil prices hitting all time highs, it is just a matter of time before it hits critical point and the world market collapses. This is why I am so disappointed that they are not trying to diversify now while we have the money to do it.

[TriniXaeno]

the question wasn't whether necessities are affected by inflation in general.

It was whether necessities would become more expensive because the populace had a lot more spending money.

I am saying NO.

Since they aren't elastic, and their consumption is pretty static, they won't see any significant increase in demand and hence not be adversely affected at all by the excess money floating around!

Again, because I've got $1000.00 extra in my pocket every month, I am going to get luxury items. Not buy more bread/ salt or any other item that constitutes a necessity.

Toilet paper and soap ain't exactly gonna triple in price overnight, nor over 5 years.

Care to wager?

[SideSwipe]

All items including necessities are affected by inflation in general.

Inflation increases when there is excess money in the hands of consumers.

Therefore, when people have the extra money, and force up the price of goods due to excess demand, you get  inflation. Why? Everything is linked. The machinery to make and package the bread, and the vehicles to deliver them increase in price, and as such so does the price of bread.

You are also only looking at yourself. Those of us in the middle class with an extra $1000 a month will spend it on luxury items - of course the long term effects means these items will be more expensive for us in the years to come. However, the poor who buy only exactly what they need to get by, will very well buy more bread, more soap, and the like. The reason being that they can afford to be a little less conservative now. When they get used to that and the prices creep out of their reach again, back to cold water. You may not buy more bread or salt or toilet paper or soap, because you can already afford to buy as much of it as you need. But look at the larger picture; there are many who struggle to buy these basics and so make do with lesser than they should ideally have. Prices need only to increase by a small margin to fall out of the reach of some.

Over 5 years isn't the issue; that was a figure of speech. If you want to be literal, look at it in terms of say 10 or 15 years. What happens this far down the line when once again those getting minimal salaries can't afford their few luxury items? What happens if after their bills, they can barely afford the raw essentials? Remember today's poor man's salary was once a hefty sum in years gone by. Even the most basic necessities have risen in price over the last few years, but thankfully we have been living in an economic boom and have been able to stay on top of it. This boom won't last forever.

Would have been better to increase the personal allowance by a lower margin and use the extra taxes to build other industries. That way you would give the poor more money to get by, without giving the middle class a lot of extra spending money to send inflation up.


Here's another way of putting it. Many people get paid as little as $2000 a month. Sad, but true. It is why we have so many people living below the poverty line. These people have an annual income below what the old personal allowance was - $25,000. This means that even with the increased personal allowance, they have no extra money to get by. It means that when inflation hits and everything goes up, while some of us can bear the extra expense easily thanks to the tax cuts, these people who are making minimal salaries and didn't benefit much to begin with...can't. And when you increase the povery margin, you increase social divide and foster a crime situation.

This is a budget for the middle class of the next couple years. It does not take the poor or the long-term future into consideration.


bear in mind that not too long ago there was a report stating that some 40% of the population of this country in fact lives below the poverty line. The CIA World Factbook lists it at 21% in 1992, before the devaluation of our dollar, and it is no secret that although the country has become increasingly rich over the last few years, salaries have not risen by a very large margin. This does set the stage for a roughly twofold increase in poverty. Even if we are set at around 21% still, that is a pretty big chunk of the population who do not need prices rising on them, even if the middle class can afford it with the tax breaks. Those people were living below the old personal allowance anyway.

[TriniXaeno]

Yeah, but the poor already pay absolutely NO TAX on their salary.

Let's say that again. NO TAX.

Not much more of a bligh they can ask for. If they aren't qualified to get a better job, now is their chance. Free Tertiary education idmc.

As for the middle income folks, we are finally getting a little piece of that black gold money. Bonus iwmc!

Come on, the country has just received a massive windfall of extra money. Tons of extra moola.

They don't NEED our extra tax dollars to ADD to that to help start other industries! They can do that with the windfall as is.

MAN, this is good news! You make it sound like we are gonna cause some disaster with some extra $$ in our pockets?

If they could give away free tertiary education, you think free bread and butter will be beyond question? lol

[SideSwipe]

That's the point. The poor weren't paying tax on their salary before the increase to $60,000. They weren't paying taxes when it was $25,000 because they weren't making enough to hit above that figure to begin with.

So when inflation hits, they'll be suffering even more than they are now. This is why we can't just let inflation skyrocket just because we can afford to give the middle class a tax break they weren't getting before. It's the poor people who have to pay for this the most. Poor people who were qualifying for the tax break before the change, and before the now-inevitable inflation.

Free tertiary education is all well and good, except:
1) You need to have suitable work experience or secodnary school passes to get in to begin with
2) With the UTT campus still unfinished and UWI already operating at a higher than optimum capacity, we can't place everybody who is eligible
3) Having graduated, there are not sufficient job opportunites for them all yet

We already have people with degrees working for less than $5000 a month. Free education is welcome, but it's also an error to believe that we have the capacity to handle it. There's a reason free education was originally set for 2008; it was to ensure there were sufficient school places when they applied and job opportunities by the time they graduate.

Giving the extra spending money isn't that great of a problem; it's not having a mechanism to reabsorb it. Personally, I'd rather the extra money go into the stabilization and heritage funds, so we don't end up in the bind we were in after the 70's boom ended.

[SPK]

Look at the salaries that teachers used to get before the 90s, they used to get along okay till the floating of the $ when the 90s hit, and look at how they get hit down hard as a result....

I just hope it won't reach the stage where our dollar has to take a little fly to pass $7 for US$1...but I fear it might at this rate.

You all want to spend, I'm sorry, if i get that money, I changing that extra money and puttin away to save!

[TrinireturnofGamez]

  The budget is good ... more due to a massive influx of money than good planning , it will undoubtedly cause inflation  and some problems in the long term,  but it will bring some benefits in the short term .  I doubt crime will be magically fixed , they need to lock up the big fish aka abu bakr , and the big drug lords whose names we all know   .
      It didn't address some frightening statistics , our hospitals suckage  and birth rate , our birth rate is low enough to force us into a position 10-20 years from now as a welfare state with too many old people taking pension  , and not enough young people to make money to pay pension without cutting into a large portion of the budget , like japan is experiencing .
            Free tertiary education IS a very good thing ,  there won't be enough places for  all who want , but obviously those with the highest grades will get in first... True we won't have enough jobs for all those skilled people but it will make us an attactive  place to invest,  a foreign IT firm won't want  to open here unless we have the trained people first..
   The oil price may stay at a high ish level permanently from now on ,  oil consumption  is on the increase in developing nations eg. China and india , while OPEC is keeping production down and hogging money from high prices, plus  eventually  oil reserves will  be depleted ... but these high prices  are good in that it will set the  world on a path towards   using renewable / nuclear energy sources , fuel efficient  cars , and eventually eletric cars . 
   I  say we can bet on at least a  40-50 USD oil price from now on , enough to keep trinidad with money to waste and tief .
   Obviously an election budget, nothing in it was that well thought out , just lots of ways to throw money away and keep people happy, still we need a new government , one less retarded than to build a 'Tsunami shelter' in a low lying area which is most likely to get wiped out  ( just admit u wanna d  tief money nah),