Monitoring Supply Sided Economics
Complementary to Ronald Reagan’s supply-sided economics of lowering taxes across the board and controlling expenditures, thereby consecutively generating productivity, Thatcherism’s main props are disinvestment and denationalisation of the socialistic public sector. Both philosophies coalesce in the full-fledged exploitation of private sector entrepreneurial expertise by disengaging the State from everyday life of the average citizen. The Sartaj Aziz initiatives inculcates both the capitalistic principles, cutting down of public sector involvement on the one hand and drastic lowering of taxes and duties on the other. His prescription is that reduction of government expenditures and the taking over of the inefficient public sector by the competitive private sector is thus matched by tax reduction incentives to entrepreneurs to lower prices, thus making it more attractive for consumers to spend more. This in turn creates a possible economic cycle of more products and services which not only makes of the resultant shortfall in revenues but also creates more jobs. The sum total of disengagement when multiplied by reduced taxes leads to force-multiplier productivity. This is the logic Finance Minister Sartaj Aziz used to excellent effect with IMF MD Michel Camdessus during his recent visit to the US. In any society where an effective monitoring mechanism exists, this strategy has a good chance of success. In a country where the basic tools of monitoring assessment and collection of revenues are flawed, this route is more than a calculated risk, a gamble that the country may well lose without the safety net of adequate and precisely structured monitoring arrangements. For the record, while seeking the Republican nomination for 1980 US Presidential race, George Bush had attacked then candidate-aspirant Ronald Reagan for espousing “voodoo-economics” as supply-siding was then labelled by him. When George Bush later became Reagan’s VP running mate in his bid for the US Presidency, the Democrats made him virtually eat his words many times over. As US President in his own right in 1988, George Bush faithfully followed the hitherto successful economic prescription of his predecessor till he faltered at the increasing budget deficit and went back on his campaign promise, to quote, “Read my lips, no new taxes!”. Despite the most advanced tax collection machinery in the world, the US economists could not accurately predict that revenues would be far short of projections and expenditures far more than planned, the resultant gap necessitated fresh taxation and destroyed President Bush’s credibility with the US electorate and his bid for a second term. Even the vaunted US Internal Revenue Service (IRS) cannot keep up with human ingenuity for devising circumventions, it has now reverted to putting the onus on the individuals as regards burden of proof with respect to the means to maintain their visible lifestyles.
