Source: The Straits Times
5 February 2003

The economy is recovering slowly from last year's bad patch, but the future is still uncertain. The various economic growth forecasts clash. When will global demand pick up? Will there be war in the Middle East? Or another big terrorist attack in our region? How will all these affect Singapore?

More Singaporeans are losing their jobs. You sense the hardship of your constituents during the weekly Meet-the-People sessions. Some are ashamed that they cannot provide for their families and must seek help. Nobody wants to hear about economic restructuring. Many ask why the Government isn't creating jobs, reducing taxes, or giving more subsidies.

You tick off your choices:

• Create unemployment benefits?

• Let the unemployed take out their CPF savings?

• Help people pay their water, electricity and telephone bills?

• Ask the government and the people to tighten their belts?

• Increase subsidies to help the lower-income and the unemployed? How much should be given, and for how long?

A balance must be struck, but where? Focus too much on the future, and Singaporeans may feel abandoned and lose confidence and hope. Tilt too much towards the present, postpone economic restructuring, and we may miss the new opportunities when the world economy turns around.

If you were the Finance Minister, what would you do?

More Jobs; Yes, but how?

A 'solution' to the unemployment problem is to reduce the number of foreign workers so that more jobs will be available to Singaporeans. Will Singaporeans agree to do the work of the foreign workers - at the same cost to the employers? What if we stop the foreign workers from coming in, only to find that Singaporeans shun those jobs?

Maybe the government should raise the Foreign Workers' Levy. But what if companies then find foreign workers too costly and Singaporeans are unwilling to replace them at their wages? Most likely the companies would just quit Singapore altogether. When Singaporeans who are unemployed for many months finally decide that any job is better than no job, will they discover that the 'foreign worker' jobs have already gone to China?

If you were the Finance Minister, what would you do?

More Investments? Lower Taxes?

More investments will create more jobs. But investors need lower corporate taxes to make up for the high cost of doing business in Singapore. Also, senior managers want to go where personal taxes are as low as possible. Without top managers and investors, there will be no new jobs.

Unfortunately, permanent tax cuts are, well, permanent. They can't be easily reversed. Reducing taxes will leave us permanently with less money for critical public services like defence, healthcare and education. If corporate and personal taxes are cut, how do we make up for the loss of revenue? Increase the GST? Increase car taxes? Increase property taxes?

Cut public services to save costs? This was the favourite cry of those who were against the GST increase. But it's easier said than done. What can we cut? Should defence be cut at this time of uncertainty? Or should we risk our children's future by cutting back on education? Maybe Singaporeans should pay a larger share of growing healthcare costs? Simply reducing government spending would hurt the economy, and Singaporeans, without necessarily creating any benefits.

What about cutting corporate and personal taxes, but not raising the GST and not reducing public spending? Some people have asked: what's so bad about a budget deficit anyway? Surely Singapore can live with deficits year after year given our large reserves?

You wonder how to explain the consequences. A country with big, persistent deficits is like a household with big debts that it can't pay off. Won't you be afraid to lend money to someone with big debts? Likewise, investors and companies will lose confidence in Singapore if we keep running deficits. They will not put their money here if they don't believe Singapore has a bright future. And without investments, there will be no new jobs.

Temporary deficits are not necessarily bad, and may actually help support the economy in a downturn. Maybe our deficit will be temporary too? No country deliberately sets out to run permanent deficits, and yet many have ended up that way. In an uncertain world, perhaps it is better to be safe than sorry.

If you were the Finance Minister, what would you do?

Weaken the Singapore Dollar?

Some people have the idea that the Singapore Dollar should be deliberately weakened. A weaker Singapore dollar means our exports will be cheaper. Hopefully this means more sales and more business for local companies. But it also means we have to pay more for our imports. Everything we eat and everything we use is imported. Our cost of living will go up. Also our bank savings and CPF savings will be worth less.

If you were the Finance Minister, what would you do?

More Handouts?

On to everyone's favourite topic: government handouts. They are never enough. They can never be enough. People are using their New Singapore Shares (NSS) and Economic Restructuring Shares (ERS) to pay off loans, buy textbooks, and pay utilities bills and credit card bills. What will they do if they don't find jobs before the next bill is due? Should we just forget about deficits and keep giving bigger and bigger handouts? How long can our reserves last?

Instead of handouts, how about allowing Singaporeans to use their CPF savings freely? Who cares about retirement when it's so far away and you need money now? But if Singaporeans do not save up for retirement, their children will have to support them. Or since people are having fewer and fewer children, the public will have to support them.

If you were the Finance Minister, what would you do?

Now what?

Choices, choices, each with its own price. You can decide to cut back on foreign workers. You can decide to have guaranteed unemployment benefits. You can decide not to lower income taxes. You can decide not to raise GST. You can decide to cut back on public services. You can decide to weaken the Singapore dollar. You can decide to let people take their CPF savings out freely. You can decide not to give further handouts. The list goes on… Each choice has its own consequences. If wages are too high or workers are not available, the factories will go elsewhere. If taxes are too high, investors, businesses and managers will go elsewhere. You can decide not to raise ERP charges but to have more traffic jams. You can decide not to raise university fees but to have poorer professors and older equipment. You can decide to cut back on defence spending and take our chances with our security.

Not choosing is also a choice, with its own penalty for not acting in time. It's all about balancing the burden of the costs among different Singaporeans. Everyone wants the benefits - nobody likes to pay the price.

Budget Day's almost here. If you were the Finance Minister, what would you do?