It has been pointed out that the solution to the financial debacle of the State of Costa Rica unavoidably involves rethinking the system of incentives and salaries of public officials.
Crhoy.com reports that "... economists and former ministers have said it's good that a containment of public expenditure be made, but if the current government and MPs really want to solve the budget deficit they must not stick only to the administrative unti but must also delve into the issue of public sector salaries."
More government spending -> more debt -> more expensive credit and more taxes. The State continues to fatten at the expense of the productive sector.
Juan Carlos Hidalgo, in his blog at Elfinanciero.com, begins his article calling the 2011 budget approved by the Legislative Assembly as “illegal”. He explains that current expenditures are included as investments, which is specifically prohibited by the National Budget Law.
In the first five months of 2010, the fiscal deficit was $670 million, 86% more than the same period of 2009.
An article in Nacion.com notes that “the deficit accounted for 1.93% of the country’s production. The Treasury expects the deficit to represent 4.8% of the GDP by the end of the year”.
Meanwhile, tax revenue grew just 5%, mostly in sales taxes, as the country leaves the worst of the economic crisis behind.