By Everson W. Hull, Ph. D.
It is not very often that this author departs from the very thoughtful views expressed by one very distinguished analyst on the full range of policy issues of great national importance that affect our region. Of special concern is the claim that:
“…leaders and ordinary citizens in every corner of the globe exhaled the collective breath of trepidation they had held for four troubling years. …… and gave reason for optimism about the future……”
With all due respect, the empirical data does not reveal a sufficient basis for this optimism. The World Bank and other reliable data sources tell quite a different story. The polar extreme “lofty appeals for empathy” come into conflict with a barrage of contractionary fiscal policy actions that will not only be harmful to the US. economy; but will yield a slew of harmful spill-over effects on St. Kitts and Nevis and the CARICOM member states whose economies are highly dependent on the performance of our hospitality centers.
Although the lofty “appeals for empathy” are necessary in maintaining the peace; they are by no means sufficient. They have little or no effect on the little Man on the Street who is hustling daily from sunrise to sunset, trying to feed his family and make his rental payments on time. What also matters to Joe Sick-Pack are the proceeds that derive from his work effort that allow him to proudly hold his head high and step up to the counter at Mem’s Pizzarea and proudly lay on the table hard cash in exchange for a slice of Pizza. Cash and the varying forms of “nearly-money” are recognized, universally, by buyers and sellers in exchange for goods and services.
It turns out that access to cash played a most important role in both the USA and St. Kitts and Nevis during the PRE-COVID-19 years of 2017, 2018 and 2019. The US. experienced its best-ever performing years, in tourism expenditures for leisure travel. In 2018, Americans spent an all-time record high US$186.5 billion on leisure travel. A significant portion of the spillover benefits arrived on our shores. In 2018 St. Kitts and Nevis stood proudly at the head of the OECS class with 1,297,385 visitors, with the dominant share arriving from the USA. And, the number of stayovers from the USA for St. Kitts and Nevis reached 80,509 in 2019, the highest level ever recorded.
With the exception of Dominica, which was hard hit by Hurricane Maria, all other OECS member states, as well as tourism-dependent states like the Bahamas, each recorded all-time performance levels in their own hospitality sectors. In the special case of the Bahamas, located a mere 110 miles and a 50-minute flight from Miami to Freeport, the number of tourism arrivals soared to 1,633,000 in 2018 and its tourism receipts reached a staggering US$3.383 billion. Its stellar performance thrust the Bahamas to the head of the 34-member OAS regional class, with a per capita income of US$37,921.
The flow in receipts from our CBI programs largely moved in tandem as investors sought a safe haven for unloading their surplus income and wealth. In the case of St. Kitts and Nevis; we were able to provide for the welfare of our people without having to show up at a commercial bank or the IMF to borrow funds to address the high cost of minimizing the spread of the COVID-19 pandemic. Setting aside the USA and Canada, the per capita income of the Bahamas, Panama and St. Kitts and Nevis surged to the head of the class of the 34 Western Hemispheric states of the OAS.
These unprecedented record-breaking outcomes across the tourist-centric region did not occur by accident. These effects go beyond appeals for “Empathy”. They are the result, in substantial measure, from the expansionary low-tax fiscal policies put in place in the U.S. during the 2017 thru 2019 interval; as well as discretionary measures aimed at reducing excessive and burdensome government regulations.
Based on the campaign promises and pronouncements made by President Biden, it is anticipated that the same contractionary fiscal “punish the rich” taxes, coupled with burdensome government regulations which crippled the growth of the US economy during the earlier Biden years will be re-introduced. During that eight-year interval, the average annual rate of growth for the U.S. was 1.6 percent per annum, the slowest rate of growth of any US presidential term in 67 years.
If the US economy is to prosper and make any contribution to the development of its neighbors in the CARICOM region, those spillover effects must come from the two dominant sectors – household consumption expenditures and business capital investment which form the fundamental pillars that undergird the growth and expansion of the U.S. economy. All other stimuli combined account for a mere 1.5 percent of the U.S. economy. Any slowdown in the U.S. economy will lead to a reduction in US. expenditures for leisure travel; which will, in turn, lead to harmful spillover effects on our region.
We are to be reminded that there are 435 representatives in the U.S. House of Representatives and 100 members in the U.S. Senate. They have been sent to Washington to “bring the bacon home”. The U.S. does not have a strong record of support for Caribbean causes. When the US. prospers, St. Kitts and Nevis does well. By contrast, if we are served the same lofty rhetoric and menu of promises that are not highly-valued in exchange for money, as was dispensed in the first Biden terms, I fear that we will see outcomes that are not very different from those that occurred under Biden’s first term.
Biden has revealed his intent to apply the same contractionary fiscal policies that he learned during his tenure at the White House as Vice President. I expect to see the same harmful effects on our region; unless the new president is persuaded differently and very early on. It is not too late to change course.
- Dr. Everson Hull is a business economist. He currently serves as Permanent Representative for St. Kitts and Nevis to the Organization of American States (OAS). He graduated from Howard University in 1977, becoming the first-ever recipient of the University’s Ph.D. award in Economics. For more than 20 years, he served as Adjunct Professor in the Department of Economics. In the private sector, he has served as Senior Economist for the American Petroleum Institute, TRW Inc. and Fannie Mae. Dr. Hull also served at the Congressional Research Service as Head of Money and Banking. This latter tour of duty led to a U.S. Presidential Appointment as Deputy Assistant Secretary for Policy and Research at the U.S. Department of Labor.
The post LOFTY APPEALS FOR EMPATHY SNUFFED OUT BY DAMAGING POLICY ACTIONS appeared first on The St Kitts Nevis Observer.
