Budgeting democracy

Unlimited resources need a budget not. Conventional wisdom understands budgeting as a process for curtailing expenditure to match available limited resources. And for most rational persons, including artificial persons, available resources are exclusive of the ability to borrow. So either national government aren't rational, or there lies a deeper story behind "Budgeting", especially, to acquire more debt for financing the fiscal deficit.
Debt and deficit, most likely have the same ancestry and genesis, because without the one, there cannot be the other. Except that these terrible twins were broadly controllable till such time money was backed by a tangible commodity, like gold.
Unfortunately, that could not work in a democracy. Primarily because, democracy for its survival, needed unlimited resources to allow politicians to spend boundlessly on their electoral promises; one way to pacify the demands of the rapidly rising middle classes demanding a fair share, was to bribe them. Perhaps, democracy is not about freedom, in the real sense; or about freedom's distant relatives, free speech and free press. Maybe democracy is only about the increasing number of global more educated masses demanding a bigger piece of the economic pie from the ruling elite.
Except that the latter figured that rather than the undesirable option of actually sharing resources, creating the semblance of a bigger pie made more sense. Paper money, or even better, money out of thin air, a concept which very few are aware off, let alone understand, was the chosen weapon for this elaborate illusion. A secret ferociously guarded: democracy's actual birth date is 13 August 1971, the day Nixon ended dollar convertibility to gold.
In this story, governments per force, to keep voters happy and for promoting democracy, more so during the cold war, ended up reducing income taxes. But, without sufficient revenues, governments just could not keep on spending on bridges to nowhere and at the same time give jobs to voters; under a rather dubious economic theory I might add. Hence the original mischievous twins were called to the rescue; the invisible but highly effective inflation and the indirect taxes.
Inflation is a silent killer, much like cancer; it strikes suddenly out of nowhere and swiftly corrodes resources. Except, notwithstanding that voters are generally not very bright people, they somehow figured out inflation; probably because, as recent research proves, spending money is painful, physically. Consequently, eventually, voters demanded and got low inflation. Unfortunately, the voters are still not bright enough when it comes to indirect taxes, despite oodles of knowledge just a click away. They continue to confuse it with market mechanism; or just don't read the fine print. Hence, democratic governments the world over shifted to indirect taxation policies, and the deception as well as the party continued.
Except the voters kept demanding more and more for their precious one vote; bigger bridges to nowhere, better and flashier roads, luxury airports, a chicken in every pot; tax collection was simply not enough. Ergo, the fiscal deficit was voraciously adopted. And since money could now be created out of nowhere, so could debt be. Obviously, if voters haven't even figured out indirect taxes yet, how will they, if at all, ever figure out the disaster debt is!
The proof always lies in the eating of the pudding.
Pakistan finally got an uninterrupted decade of democracy, and along with it we got oodles of unwanted debt; three times the debt we borrowed in the earlier 60 years of our independence. At 31 March 2018 Pakistan has piled up debt and liabilities of Rs 28,297 billion, with no idea how to pay it back. And this is without considering circular debt estimated by some at Rs 1,000 billion. And yes together with extremely high debt, we got low direct taxes, low inflation and high indirect taxes; the story is picture perfect.
As things stand today, Pakistan will need to "budget" for more borrowings to meet all its expenditure relating to defence, development, subsidies and government operations in 2018-19! Why? Well because we have borrowed so much that our Federal revenue receipts are only sufficient to cover our debt obligations. What is more worrisome is that pretty soon even this equation might not balance. Accordingly the next government is looking at the triple challenge of inflation, more indirect taxes, and way more debt; and I for one am clueless on how you budget for that in a democracy. On a separate note this story does provide credence to the election not happening conspiracies while at the same time raises curiosity about those vying for the top slot this election.
The probability that the next chaps in office will also try to sell the better and happier story about the GDP growing at the rate of 5% and above is quite high, since there don't seem to be any other ideas floating around; except how long can you keep doing that. For those who are curious about the real GDP story and how it eventually ends; perhaps someday......
For the moment, I for one struggle to figure out, how the next elected government will even begin budgeting democracy.
Eid Mubarak.
(The writer is a chartered accountant based in Islamabad. Email: [email protected])