Goan Welfare State

The United State of America began its Welfare System in 1930’s under trying circumstances of the Great Depression, a concept wherein the government protects and promotes social wellbeing of its citizens. Some European states already had their welfare systems in place, which were designed on the premise that they will be funded through redistributionist taxation which means taxing the wealthy.

Welfare of citizens is justified when undertaken by rich countries or those that are growing at a rapid pace, as government revenue collection are robust. But once an economic slowdown occurs and starts hurting government income, it reflects on their spending. To overcome this mismatch, governments raise debt to tide over these expenses hoping it is a temporary problem. It is this debt that has now spiraled out of control in Europe and banks are shying away from refinancing government debt. The European debt crisis has exposed government expenditure on unnecessary welfare even though European economists and politicians are in a denial mode. The recently suggested austerity measures that are being recommended to these countries to qualify for economic bailouts might have signaled the beginning of the end of the welfare states.

In the recent budget the new Goa Government announced a slew of welfare measures notwithstanding the European debt crisis. While some measures were necessary many might actually lead us into our own little debt traps. For example the eliminating of VAT on petrol was very important to tide over high speculative oil prices, but some allowances to Goans have the resemblance of the ‘cradle to grave’ welfare policy followed by many European countries, that is now turning out to be a graveyard to their financial existence.

The most worrisome part is that Goa already has a deficit of around 82 crore in this budget, which makes all these welfare measures all the more needless. The figure might look small but can balloon when interest gets compounded. This is like a Chief Minister donating money to the not so needy with his credit card without knowing how he will settle his credit card bill. Spending beyond your means and thinking of collecting revenue later is not a clever policy.

Deficit financing is not wrong per se, but makes sense when utilized for capital expenditure. For example Goa takes a huge loan for building a green power plant that will make Goa self sufficient in power, or a dynamic unemployment allowance for the Generation Next (by the way was first suggested in this column) which puts pressure on the government to create employment. These are important decisions worth taking loans and the tax payer will not mind the risk because he knows the end result.

The policy to collect revenue by milking the tourist to feed the local population might result into long term animosity between the tourist and the local. We must not assume that the tourist that visits Goa is uninformed, once he figures out the math of government income and expenditure that takes place it will give rise to one arrogant tourist treating Goans as second class citizens. Remember the last time the central government changed visa norms for long staying tourists; many tourists went on record explaining how this decision will affect the economy of Goa. Revenue collection from a tourist should be treated as a deterrent to improve the quality of the tourist and not to feed Goans.

Years back when Mumbai found out that children were used in the business of child begging, the city ran a advertising campaign that used a slogan which read something like this; ‘Give money to a child and make him a beggar for life’. Let this Goan dole not rob the Generation Next Goans of their dignity.

Europe and United States welfare states came about in difficult circumstances as these countries were ravaged by World Wars and the Great Depression. Comparatively Goan circumstances are much better and do not deserve a welfare state.

Above Article appeared on Herald Goa on April 20, 2012