The government recently committed to infrastructure projects in order to create jobs and bolster the economy. But if these public works projects aren't truly necessary and the costs outweigh the benefits, all is in vain and taxpayers' money has been wasted.
Nicole Alpert
Friday, December 05, 2008
The government recently committed to infrastructure projects in order to create jobs and bolster the economy. But if these public works projects aren't truly necessary and the costs outweigh the benefits, all is in vain and taxpayers' money has been wasted.
Political parties have been quick to prescribe remedies to the government to boost the economy, perhaps too quick.
The Democratic Alliance for the Betterment and Progress of Hong Kong and the Liberal Party have made the community wince with their suggestions.
The DAB wants makeovers in areas such as Tin Shui Wai and the Liberals call for HK$6 billion in shopping coupons with billions more in freebies, lucky draws and passes to Disneyland.
While most of the proposals are laughable, their calls for tax relief are right on.
We've cut taxes before and seen great progress. For instance, the levy on wine - alcoholic content under 30 percent - in Hong Kong was 80 percent at the beginning of 2007, cut to 40 percent in last year's budget and then abolished in February.
Some criticized the cuts, but they have created jobs and fueled a new and successful industry.
The benefits are numerous and include the growth of new business, expos and fairs, more value-added industries such as retailing and a wider choice of quality wines for consumers.
Tax cuts have great potential to stimulate growth - individuals will have more money to spend on whatever they wish, which will improve the economic climate.
The government is always being criticized for incompetence - it's definitely smarter to let people manage their own money. Families may choose to save, invest, pay off debt or spend.
The same funds that pay for makeovers at Tin Shui Wai and giveaways may help those having trouble managing the most basic necessities, such as food and rent.
Instead of going for coupons and freebies, both with high administrative costs and risks of corruption, we may stimulate growth by putting more money into people's pockets.
Proposals that seek to control the way individuals spend will create market inefficiencies.
We have been told that we need a stimulus, an injection of billions of dollars, but instead of spending our taxes on risky projects the government should explore public policy that will encourage new growth.
It should only invest in public projects that are necessary - if they aren't it might as well pay people to dig holes and refill them. It should increase the amount of money in taxpayers' pockets, scrap laws that hamper growth and help the unemployed find jobs and acquire new skills.
The recession is not something a lucky draw or Disneyland passes can get us out of, real improvement in the economy takes sacrifice, hard work and patience.
Nicole Alpert is a research associate for The Lion Rock Institute, a free-market think-tank
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