The President and his Vice President are singing the same tune

Aug 07, 2023 Peeping Tom

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Peeping tom…

Kaieteur News – Both President Irfaan Ali and Vice President Bharrat Jagdeo have been forced on the defensive on the occasion of the 3rd anniversary of the present PPP/C government. They have been forced to defend their policies in light of the high cost of living.

Both have restored to the same hymn book. As expected, they both claimed that the government has been increasing disposable incomes as a response to the cost-of-living crisis.

Jagdeo contended that the ‘Because We Care’ cash grant and the increase in old age pensions and public assistance have put more disposable incomes in the hands of citizens. He also claimed that Guyanese are paying less taxes, and more jobs have been generated, thus implying that more monies are in people’s pockets.

President Irfaan Ali pointed to the more than 200 taxes and fees that were removed which he said placed tens of billions of dollars in the pockets of ordinary citizens. Were that only the case, there could hardly have been grounds for complaints. The fact however is that these tens of billions ended up in the pockets of the stores, shops and supermarkets and the reality was that they ended up buying less than before.

I normally give each of my grandchildren a weekly stipend, just so that they can have a little extra pocket money to spend. When the cost-of-living crisis erupted, I increased their weekly stipend.

But after the first week, one of them came and said that I would have to increase it more. She claimed that because the prices at the cafeteria had increased and even with the increased stipend, she was not able to buy the same number of things.

That incident illustrated the paradox of increasing disposable income. If prices rise above the increase in the disposable income, the consumer is not necessarily better off.

Jagdeo is supposed to be an economist. He therefore ought to know that disposable income and cost of living are two fundamental concepts in economics that play a significant role in shaping an individual’s financial well-being.

Disposable income refers to the money remaining after taxes and essential expenses have been deducted from one’s total income. On the other hand, the cost of living encompasses the expenses necessary to maintain a certain standard of living, including housing, food, transportation and utilities. While it might seem intuitive that an increase in disposable income would lead to a reduced cost of living, this assumption is an oversimplification.

A higher income suggests that individuals would be able to purchase more and improve their overall quality of life. However, this fails to consider that cost of living may also increase as disposable income increases and if it increases above that of the increase in disposable incomes, this would result in reduced purchasing power.

An increase in disposable income therefore does not necessarily lead to a reduced cost of living. And if the government was monitoring prices in the market, it would have concluded that the increase in disposable income, occasioned by its economic policies, would have been cancelled out by the steep increase in prices.

One-off cash grants such as the ‘Because We Care’ grant paid to every school child is a short-term measure. It is an annual grant paid during the August holidays and therefore only brings immediate relief in preparing children for the new school term.

But what happens when the school child has to travel to and from school, has to have lunch and buy other necessities throughout the school year. The one-off school cash grant cannot stretch throughout the academic year. Once the grant is exhausted, individuals and families are left facing the same cost challenges.

Government’s cash grants have not been properly targeted. Both rich and poor have received the school’s cash grant, the disability grants, the household grant and the riverine and hinterland cash grants. Some multimillionaires have climbed the steps of their children’s school to collect the school cash grant even though they really do not need it. But many refuses free government money.

Not everyone has enjoyed an increase in disposable income. In fact, most have not. The increases paid by government to public servants have long been eroded by the steep increase in prices for basic necessities. The price of cooking oil, including locally made cooking oil, has climbed appreciably. Even though freight rates have fallen, there have been no corresponding pass-through effects to consumers for imported goods. In addition, the price of vegetables and even rice has spiked appreciably in the market.

The government has also failed to accept that the large sums that they have pumped into the economy at a time of supply-chain constraints may have actually had an inflationary effect.

But who cares? The cost-of-living crisis has not hurt the rich friends of the government. In fact, these friends have profiteered during the crisis and are continuing to benefit from the disposing of the disposable income by the poor.

Disclaimer: The opinions expressed in this column are those of the author. They do not purport to reflect the opinions or views of Kaieteur News.

 

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• Both President Irfaan Ali and Vice President Bharrat Jagdeo, supermarkets, the government

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