The impact of bankruptcy

The CNMI is broke! Subdued the demeanor of elected officials may be, it doesn’t change the hard reality or factual fiscal trauma of the CNMI sinking steadily into the sea of bankruptcy. Yes, you may disagree as a blind and misguided loyalist. But let’s realistically review the local financial state of affairs to confirm or deny this assertion.

Realistic scenario

The CNMI has seen a huge drop in its annual revenue collection that took a nosedive from a whopping $256 million annually to $102 million. The approximate cumulative loss is nothing less than $154 million. It was the exodus of foreign capital that triggered the loss of some $5 billion to $7 billion and the resulting economic paralysis that is now endemic in this archipelago.

Against its projected $114 million for fiscal year 2013, the CNMI can’t pay the Fund where it owes about $332.5 million, matching funds for Medicaid, medical referral, PSS that is slated to overspend by $7 million; defray CHC’s annual operations cost of some $40 million; reinstate regular work hours; and other obligations.

We no longer could stare down the fiscal trauma, specifically heavy losses in foreign capital which requires critical and honest review. Too, for as long as the pension program isn’t injected with major reform (painful reduction of pension benefits and health coverage) it will return to bankruptcy, time and again.

The reason is simple: politicians offer promises they can’t fulfill because they lack the foresight and requisite credentials and expertise to do any justice to the net negative effects of the deepening economic meltdown. What’s taken up as remedies in hollow fashion is usually wrapped in costly unintended consequences. Otherwise, the imperiled fund would have been solvent today. It isn’t!

Be it bond pension obligation or land sale, there’s no guarantee it’ll stay financially afloat over the long term. Herein lies the real need for leadership with integrity who are capable of facing the difficult rain dance of bankruptcy and subsequently make hard but educated decisions.

Prohibitive taxes/fees

In their haste to perk up revenue generation, evil geniuses decided to impose more fees and taxes on private industries. The airheads are mindless of the hardship businesses have to endure with the highly prohibitive cost of utilities, monthly rentals, and salaries.

Their false premise would ruin more than encourage economic recovery. This as the economic meltdown enters more dangerous and implosive terrain. They’ve chanced measures without the wherewithal nor expertise to resolve revenue contraction with some use of common sense.

Thus, the new taxes would exact the complete opposite-far less revenues in the impending fiscal year-as the grain of hardship is cemented permanently and more severely at the village level. It would force business closures rather than venturing into total bankruptcy. And the chance of leaving to avoid the worsening business climate is the only next best thing to do.

More business closures translate into far less revenue generation for the local treasury. This would trigger paring down the number of employees in both sectors. It means more people would be jobless before long. The lack of employment places more people on the NAP line, bringing the total number of recipients into an historic high. A complete Nanny State is now at its embryonic stage.

Home foreclosures have spiked in recent years and the parade gets longer each new day. It’s the loss of the first family home that translates into total family displacement. This loss didn’t spin out of thin air. Perhaps both parents are victims of job losses and could no longer meet real estate obligations. The foreclosure effectively destroys the tradition of pride in home ownership. But the guys and gals dismiss it as a fly by cotton ball or inconsequence.

More businesses would join the second wave of foreign capital exodus. Remember Stockton, California, and other nearby cities declaring bankruptcy or the wealthy from France and Spain leaving for nearby countries because of the impending imposition of more taxes at home?

You can’t blame them for leaving. We have forced them to think with their feet. Was this equation too difficult to comprehend? Did we extend a helping hand to foster lasting partnership? Or did we just bid them with the usual adolescency of sink or swim? How do we make up for unhealthy and self-inflicted miscalculations? The prognosis is critically unsettling and nasty too!

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Need for psychological lift

The NMI needs some real time psychological lift to get out of its deepening economic meltdown. The focus should be revival of foreign capital, the ultimate goal being sustainable economic ventures. We could no longer treat foreign investors with the “them against us” attitude. It would have to be one of nurturing lasting economic partnerships.

It means returning to the drawing board to improve upon negative laws that have forced the recent exodus of foreign capital. Politicians would find this assignment difficult for it would involve very unpopular decisions. But take your pick: economic health for the entire archipelago or abject poverty against the multitude who yearn for strong leadership.

Our traditional mode of life-farming and fishing-is an issue we’ve ignored for decades. Does it surprise anyone that it still surfaces as the most powerful aspect of livelihood similar to a two-headed corn snake we’ve taken for dead a long time ago? Isn’t there a subtle message in seeing permanence of tradition resurfacing when nothing else works here?

Unless we proactively engage due diligence on this score, we would continuously plunge into hardship and bankruptcy when fickle industries like tourism nosedive with every shift in the nearby markets. It can be done if we work up the resolve to burn the midnight oil until due diligence is attained on a new plan remapping the future of these isles. It also requires bringing farming and fishing to 21st century mode of production lest we’d be relegated to the Sabalu Market for life.

Would the CNMI be able to see sunny days replace gloomy dark clouds that hover beneath the blue skies of paradise? We need tons of psychological lift to gradually exit fiscal paralysis. Need our memories of an island paradise be a painful one that includes relocation elsewhere because of far less opportunities at home? What’s your answer?