The stock market deflated, responding mainly to news about the diminishing exports. The currency weakened, a foretaste of how the unseemly compromise on the revenue measure inspires investor interest in our economy.
No one could say we were surprised by the outcome of the bicameral committee session. It was the sort of legislative contortion widely expected to happen.
From the time the Senate began to hedge on the measure, we all expected that anything that comes out of this process would be shaped by selfish political considerations rather than by national interest.
No politician worth his salt wants to raise taxes. Taxes are predictably unpopular. Although citizens might have limitless demands for government service, their appetites for taxation are always limited.
And so it has come to pass that the final version of the VAT measure retains the existing 10 percnet rate, junks that funny "no pass-on" provision, removes remaining exemptions to widen the scope of the tax and gives the President "standby authority" to raise the rate 12 percent under certain conditions – but only after the current year.
Funny, but the conditions for raising the VAT rate to 12 percent, as defined by the bicameral committee version, already pertain. Yet, our gallant legislators would rather that the standby authority be exercised by the President only after the current year.
But even that ridiculous measure emanating from the bicameral committee appears to have a poison pill embedded in it.
The opposition politicians who, expectedly, lost the vote are now, expectedly, threatening to take the matter to court. As it happens in this country, even pieces of legislation may be subject to a restraining order from the court. That happened with the Mining Act, which sat on the table at the Supreme Court for years while our mining industry went comatose.
The mountains heaved and heaved, only to produce a mouse. And even that mouse seems to be constitutionally impaired.
Not only is the final version of the VAT measure queer, it seems afflicted with planned obsolescence. It seems intended to constitutionally self-destruct.
All that work and all that waiting and this is all we get: a revenue measure that will not improve revenues dramatically enough to arrest our slow slide to fiscal doom.
All that work and all that waiting and we are rewarded with a revenue measure that insults our intelligence.
All that cutting and all that sewing and what we get is The Emperor’s New Clothes.
And so it is that our fiscal prospects are as naked as can be. Our legislators worked and worked and worked – and at the end of it all, our fiscal prospects are as vulnerable as when this whole circus began.
So what is the storyline that this event delivers to the international investment community?
To be sure, it is not a story about how stupid our legislators are. To the contrary, it is a story about how crafty and insidious our legislators are, trying to deceive everybody by passing a revenue measure that barely improves revenues.
Because of that, it is an even more disturbing storyline.
It suggests to the rest of the world that we have legislature that is so chronically obsessed with political self interest it cannot rise to the challenge of the larger national interest. It suggests to the rest of the world that we have a government that is long on politicking and short on statesmanship.
This queer piece of legislation blares out the worst signal we want to give out: that we are only pretending to solve our problems but lack the institutional capacity to grapple with those problems in any substantial way.
Because we are led by politicians unwilling to bite the political bullet at crunch time, there is no way we can cut the Gordian Knot of chronic deficits and compulsive borrowing. Consequently, there is no way we can move dramatically ahead to close the infrastructure gap, commit to effective economic investments and improve the pay and the morale of our public sector.
This queer piece of legislation signals to the rest of the world that we are not quite ready to move decisively on those things that ail our economy. We are only prepared to take half-steps, adopt half-measures and try to muddle through the tangle of problematic policies that bedevil our economy.
I dread the thought of running into any one of those investment analysts who regularly come to town on behalf of the large investment funds to take a pulse of our economy. I dread the look on the composite face of the international investment community, a look that says: What are you guys trying to do?
In a way, the bicameral committee’s version of the VAT bill may be seen as an attempt to scam the investment community. It goes through the motions of trying to improve our revenue base but, in fact, condemns us to further borrowing.
No wonder then that the reaction of the markets to last Tuesday’s news of the bicameral committee "breakthrough" was as tepid as it was.
It is comforting that the VAT measure is finally out. But it gives us only cold comfort.
In the last analysis, we undertake only a token response to a screaming problem. That is discouraging to investments.
If it is discouraging to investments, that is bad news for our people. It means there will not be enough jobs to soak up the unemployment and not enough resources on the part of government to do anything meaningful about the poverty gripping our people.
By deciding they were not willing to assume the short-term political toll of passing a substantial revenue measure, our politicians have opted to condemn our whole nation to chronic deficits, sagging investor confidence and an uncertain future.