Ruto's poisoned economic chalices that he must confront

 

By winning the 2022 presidential polls, the Kenya Kwanza (KK) coalition ingested several poisoned economic chalices.

The first chalice was the national debt. And it has proved more poisonous than originally thought. 

KK has boldly tried confronting the national debt as best as possible, paying it back through taxes.

It was a noble idea from whichever angle you look at it. Someone has to pay that debt, today or tomorrow. 

Curiously, Kenyans never complained about paying the debt, it was about their taxes going to corruption and opulence. 

By withdrawing the proposal to raise more taxes through the Finance Bill, 2024, the ruling coalition has slowly swallowed four other poisoned chalices. 

One is levies, including the fuel and housing levies. They are seen as less contentious, but just like taxes, reduce your disposable income.

Like taxes, we shall soon ask where the money is going. Public money is public money, levies or taxes. It’s time the distinction between levies and taxes comes out clearly and the circumstances under which one can replace the other.  

Third is government expenditure. We often forget the unintended consequences of some key decisions. 

By cutting the government expenditure, we lose the fiscal stimulus. Government expenditure since John Keynes’ seminal work creates demand for goods and services, which by extension, creates jobs and stimulates the economy.

That is why Kazi Mtaani made economic sense. Remember the government is one of the economy’s biggest customers. Supplying the government with goods and services is a big business that leaves many salivating. 

The ability of the government to stimulate the economy is underappreciated whether through creating demand or cutting interest rates (monetary stimulus). 

The government plays a bigger role in our economic lives than we think, forget all the hype on the market economy.  

Luckily, one of the unintended consequences of making economics the fulcrum of the 2022 polls is that we now appreciate more the role the government plays in our economic lives, for better or for worse.

It’s not just about licences or adjusting the price of fuel. 

The growth in our economy in the last decade was driven by government expenditure on roads, highways, rails and other big projects.

Have you visited a high-rise building under construction in the morning and seen the number of employees? 

Economic stimulus

Did the cut in expenditure target the sectors with minimal fiscal stimulus? We can do away with flowers but need roads. Do you recall the economic stimulus projects during Covid-19? 

The cut in expenditure will have the opposite effect. The fourth poisoned chalice is salary increment freezes. This will gnaw at productivity and morale. Remember one of the complaints to the KK government is the high cost of living.

Indexing salaries to inflation would protect the employee purchasing power, which has been further eroded by new taxes and levies.

Wages and salaries are sticky and take long to rise, but prices easily adjust to taxes, levies, laws, regulations and economic shocks.

Kenyans have gone around the rising cost of living with side hustles. In one study, I found that 65 per cent of formally employed Kenyans run a side hustle.  The fifth poisoned chalice is reconstituting the Cabinet. The same old faces are back.

It seems some “invisible forces” are more influential than public sentiments or Gen Z voices.

The 2027 polls matter more than the present. The more things change, the more they remain the same.

The remaining appointments to the Cabinet are unlikely to cause waves. The key consideration will remain retaining or bringing on board critical voting blocs on the road to 2027. 

The last poisoned chalice is curbing corruption. Think loudly, who has access to corruption deals? It’s not me and you. 

If corruption is curbed, lots of beneficiaries of mega deals will be angry. Conventional wisdom shows big boys (and a few girls) are handy during polls. Is it time we made public all donations to political parties? 

Do you anger these few beneficiaries or the millions of voters? Yet of all options open to deflate national anger, facing corruption head-on would be the most effective.

The president would make a few enemies but lots of friends. He would not need to cut expenditure and its stimulative effect. It would be easier to pay the national debt (and local debts to suppliers and contractors). And trust me, it’s a vote winner.  

Political blocs

If you swallow poison but survive, you will still suffer from long-term effects, both physical and emotional.

You are better off taking no poison. My focus was on economic chalices.

There are politically poisoned chalices too like annoying the political blocs that helped the government gain power. Add annoying foreign allies. Political analysts can take that up. What is now clear is that being a political leader in Kenya is no longer a walk in the park.

It will no longer be an endless honeymoon. It will be like raising children - hard work for years to come after a night or so of pleasure.