IRATE voters say their elected officials should “Do Something!,” referring to the CNMI government’s wobbly financial condition and weakening local economy.
Of course elected officials can “do something,” but most voters won’t like what has to be done. Not a lot of voters want “solutions.” What they want is for the government to give them what they need, now!
Which is the root cause of the government’s perennial financial problems.
Politicians can’t win an election if they don’t promise voters all the good stuff: more and better paying (government) jobs, more funding for education, scholarships, medical referrals, healthcare, public safety, paved roads, homesteads, infrastructure, government-backed loans, subsidies for utilities, etc. etc.
Politicians who win elections will eventually realize that all those goodies require tens of millions of dollars each year that the government doesn’t have because the economy is down and not producing enough tax revenue. Politicians in office will also eventually acknowledge that for the economy to recover, there should be more tourists visiting the islands, and a new investor or investors should move in and do business here. The Commonwealth economy took off in the past only because tens of thousands of tourists visited the CNMI each month, and many new businesses flourished. Consequently, the government’s coffers were loaded.
Today, tourist arrivals may be “improving,” but only if compared to the abysmal numbers recorded during the pandemic. Based on the pre-pandemic figures, arrivals are still significantly down. And instead of new investors opening their doors in the CNMI, several businesses are quietly downsizing or, worse, shutting down because of a sputtering economy, which is compounded by an exodus of workers and residents, the rising costs of living and/or doing business, and the administration’s insistence to take more money from already struggling taxpayers and businesses.
But yes, lawmakers, right now, can “do” something. They should, first of all, reject fee/tax hike measures. Then they should pass a revised budget that reflects a more realistic revenue projection. They should identify funding priorities — the legally mandated, first of all — and impose across-the-board funding cuts on each and every single government branch, department, agency, office or program.
The “solution” is plain to see. Many ordinary households do it all the time. If they can’t afford it, they don’t buy it. They spend only the money they have on things they truly need.
But this is the opposite of what many people — voters — believe their government should do. Elected officials can tell the truth, for once, and admit to voters that there’s not enough money for everything they want. Hence, the need for painful cuts. But then again, other politicians can claim that they have a “solution” to the government’s financial crisis that doesn’t require austerity measures. Who do they think will win in the next election?
And so the government run by politicians who don’t want to lose their jobs will do what they’ve also done in similar situations in the past. Elected officials will go through a “budget process” to justify “revenue projections” that are likely to be delusional, especially if the economy doesn’t improve dramatically soon. Then, because the budget law it passed will declare that “x” total amount of money should be collected in this fiscal year, the government can then issue purchase orders and cut checks — even if the actual revenue collections fall short. Sorry CUC. Sorry (and good luck) government vendors.
And as economists have pointed out, increasing tax rates doesn’t necessarily result in more tax revenue, especially in this economy. It is likely that many taxpayers will make the necessary adjustments to cope with yet another additional cost of living and/or doing business in the CNMI.
But again, once the tax-hike measures are enacted into law, the government can claim that it will collect more revenue and therefore can continue to spend money…it doesn’t have, and may not have.
Economic recovery is the key. And economic growth should be the goal. The CNMI needs more tourists and new, legitimate investors and/or industries. But elected officials can only do so much. So many things pertaining to the economy are beyond the CNMI’s control — regardless of who is elected into office.
What the government can control is its expenditures. It is in trouble because it refuses to live within its means and expects local taxpayers or Uncle Sam (i.e., federal taxpayers) to continue to fund the Commonwealth’s profligate ways.
But, as usual, most elected officials who want to remain in office will not dare propose major cost-cutting measures. They will not admit that the government has a spending — not a revenue — problem. They will continue to assure us that there are better days ahead…as long as they’re in office.
To be sure, this latest CNMI financial crisis will not lead to civil unrest. This is an American Commonwealth after all. Families and individuals who are citizens of the greatest country in the world have plenty other options. And not a lot of them will stick around to pick their government’s tab.
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