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The article Argentine Government Says It Cant Pay Its Workers, by Larry Rother, is about how the Argentine Government has not collect enough taxes to pay more than half a million employees. The scarcity principal is in effect in this situation, because the government has a limited amount of money to give to its employees. The people of the country are becoming outraged because the president gave himself a raise to 1500 pesos a month which is the highest amount a government official can be paid. When you put that into perspective, its seems very inefficient because there are people who are getting no money which is vital to keeping them and their families alive, and the most wealthy people in the country are continuing to get richer. One method the government is using to try to solve the problem by producing more pesos as a quick fix.
One of the problems with this solution is that it could cause inflation and lower the overall value of the Argentinean peso. A decrease in the value of the peso, would Argentinean businesses would be unable to compete in the world market because their money would have no steady value. As the value of the peso continued to drop, businesses would have to find ways to cut costs and make more money. This would entail workers being laid off and prices being raised. If the market was perfect, price increases would be unacceptable and the businesses would cease to exist. This would thrust the economy into a downward spiral and take years to repair.
The other proposal to help the situation was to tax businesses that were projecting big earnings in the future. This would raise the 2 to 3 billion dollars the government needs to pay the salaries of the employees. It was also proposed that the government put a twenty percent levy on gas companies. The problem with this was that the gas companies raised their prices at the pump in defiance of the presidents calls for their price restraint. The last proposal in this article was for a tax on agricultural exports. The government is proposing these taxes as one time taxes.
The president was sworn in last month though, and is already unable to pay his employees. But he has the ability to pay himself and his other officials the top salaries the law will allow. The government struggled with the same problems back in the eighty's. They have finally been able to get the peso back to one dollar to one peso value but the inflation rate has been on the rise in the past few months. If the government begins to raise taxes to help pay for their employees it will cause businesses to layoff workers and raise prices. If the government then produces more currency to pay the workers without anything to back their peso up that will hurt the businesses as well.
I have no idea what the best solution to this problem would be. But any drastic changes would have irreversible effects. I think that in the long run this problem may be able to work itself out. What the government is missing right now is the collection of revenues. They will eventually be collected, but that does not help the people without pay checks. And the effects do not end with the government workers.
It continues on to the people they purchase groceries from, the landlords and energy people. When the government workers and not being paid what they are owed the people they owe money to are not being paid either. And they cannot pay their bills and so on. This hurts the entire economy and seems to be a serious problem with no quick fix. Most likely it will take care of itself in the long run, but the problems caused in the meantime may have adverse effects on the future and reputation of the government.
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