What Now in Haiti? Jude Wanniski February 29, 2004

Memo To: Karl Rove
From: Jude Wanniski
Re: A Supply-Side Solution

You may not remember, Karl, but at the very start of the Bush administration I urged you to put Haiti into your must-do agenda for the President's first term. I'd known at the time of the President's interest in taking on Iraq on the other side of the world and suggested he deal with the poorest country in our own hemisphere. The reason I directed my suggestion to you as the President's closest political counselor was that in 2000 Mr. Bush got only 7% of the black vote. If our government could not help relieve the miseries of the people of Haiti, a few miles from our shore, what hope would there be for the US doing anything about the poverty and disease thousands of miles away? I think I even mentioned to you that the most broken countries are the easiest to fix, because almost anything you do that is correct will bring improvement. Now that President Aristide is gone in this new crisis, there is another opportunity for Mr. Bush to commit himself to "fix Haiti," and that the solution lies in supply-side economics.

I'm sure you didn't see it, but here is a memo I wrote to Charlie Rangel on February 11, when we got the first reports the rebels were taking dead aim at bringing down the feckless Aristide government. Charlie is now making lots of noise about how the Bush administration failed to take action to keep Aristide in office, but he has also been derelict in getting to the economic core of Haiti's problems. Check out its dollar debt and those tax rates and you will see what I mean. I know how much you all admire Glenn Hubbard, who was the President's chief economic advisor until he returned to his teaching at Columbia University. He'd be a good choice to lead a supply-side team to Haiti to recommend changes that could get it growing at a decent clip.

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Haiti Erupts!!!

Memo To: Rep. Charlie Rangel [D NY]
From: Jude Wanniski
Re: The Poorest Country in the Hemisphere

There was a time, Charlie, when you were really concerned with conditions in Haiti. There was a point where you played a major role in persuading the Clinton administration to send our armed forces to Port au Prince threatening invasion unless Haiti’s military government stepped down and allowed Jean-Bertrand Aristide to return to power. That’s what happened, almost a decade ago, and after a few years of U.S. military occupation of Haiti while Aristide was getting his footing, we now must accept the fact that Aristide has been a total failure, and that life under the military government of General Cedres, as bad as it was, was marginally better than it is now. When I saw the front page of the New York Times yesterday with headlines of insurrection bordering on civil war, I thought of you and how you seem to have washed your hands of the situation and walked away from the poorest country in the hemisphere.

If you remember, Charlie, I told you repeatedly over all these years that Haiti was not poor because Haitians are lazy or dumb but because they have been victims of the International Monetary Fund. The practice over the years has been to lend Haiti money and when it has trouble paying its debts to offer to lend them enough more to pay interest on the debts as long as they agree to IMF “conditions” that make matters worse. That is, conditions involving currency devaluation and higher rates of taxation. These cause the Haitian economy to become LESS able to service its dollar debts, which in turn causes the IMF to do another round of lending and perverse conditions. We have now arrived at a state where 8 million impoverished Haitians are more than $1 billion in debt and the taxes that are squeezed out of them are making it impossible for them to make ends meet even at the lowest standards of living.

Your staff has been helpful to me in tracking down similar conditions in Black Africa, and it also helped direct me to at least some sketchy data on Haiti, which I hope they will bring to your attention. On the personal income tax, I find a worker hits the 10% tax bracket at $444 per year, the 25% bracket at $5,555 per year and the 30% bracket at $16,000 per year. On top of these rates there is an additional 10% VAT tax, and an old age and disability tax on wages of 6% per month on all wages over $25 per month. Then there are the business taxes on top of the VAT: 35% on all profits over $16,000, but with graduated rates from all profits up to $444 per year, 15% over $444, and 30% over $5,555. These are disgraceful numbers, Charlie, adding up to such an oppressive tax take by the government that enterprise cannot get started, much less survive. Of course there is rampant corruption and crime alongside the political insurrection.

It will not get any better unless you personally use your influence in the Democratic Party to do something about it. As the ranking Democrat on House Ways and Means, you have one of the most important and powerful levers of power in your hands, especially the power to make yourself heard on an issue as deplorable as this one. You will recall, I hope, that I urged you to get the Clinton Administration to send a team led by your old friend Jack Kemp to Haiti, to sort out the mess created by the IMF and its powerful supporters in the big banks. I’ve urged my Republican friends to do the same over the years, but there is even less interest there than I’ve had from members of the congressional black caucus. It would be an easy thing to fix, because the fix so obviously lies in sweeping away the Haitian tax code and replacing it with a simple system with income thresholds at much higher levels. For all the billions U.S. taxpayers spent on the military solution in Haiti, it could also be arranged to have a good chunk of Haiti’s IMF debt forgiven. The first step, though, is to put yourself back into the picture instead of walking away from it. If you’re no longer interested in Haiti, who will be?