Tuesday, June 10, 2008

Society for not-so-different politics

"Society for Different Politics" is one of the new Latvian political parties, lead by People's Party's defectors Aigars Štokenbergs and Artis Pabriks and a group of high-level managers, mainly from finance sector.

They have been one of the driving forces behind the pensions referendum, which would increase the old-age pensions dramatically. Now, they've released the rest of their economic platform. They would like to:
  • cut the personal income tax from 25% to 20%, effective 3 months from when they get into the government.
  • cut the corporate income tax for smaller companies from 15% to 10%.
The first proposal alone would cost 200 mln lats (280 mln euros) per year which is 1.2% of Latvia's GDP. That comes in addition to their pension increase proposal which would cost 0.8-1% of Latvia's GDP.

They claim that they will pay for that by firing 22% of Latvia's civil servants, also in their first 3 months in government. Trimming down Latvia's bloated bureaucracy would be good for the country but doing that on such a large scale in such a short time would be both dangerous and legally impossible (there is a lot of protections for civil servants in Latvian labour law).

So, "different politics" is degenerating into promising everything. Tax cuts, benefit increases, all at the same time, with no realistic proposal of how to pay for that. If there is anything "different" here, it's that the unrealistic promises of previous parties were a bit more modest than "Society for Different Politics".

I think that the ex-bankers at the leadership of the "Society" are perfectly aware that the numbers don't add up. (And Štokenbergs himself was one of the few people to predict inflation at 13-14% last year, so, I trust his numbers skills as well.) What they will actually do, if they get to power... I don't know.


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