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