By Amado P. Macasaet
It is not funny that the government will do massive overspending in 2015, according to Arsenio Balisacan, director general of the National Economic and Development Authority.
The statement creates the impression that the Aquino government’s spending mood is in peaks and valleys. The peak will force the government towards more borrowings. The valley will reduce government deficit at the cost of slowing down economic growth.
We share the belief that being sunk deep in debt to push growth is desirable. An intermission of under spending is not.
There is a necessity to save funds from wasteful unproductive spending. There is no necessity to scrimp if the result does not benefit the economy. The only gain is the Aquino government can pat itself at the back for being frugal.
Strangely, it is the fact of being frugal that resulted in huge “waste” when the President pooled savings into one kitty called the Disbursement Acceleration Program. A good part of the fund was given to favorite lawmakers in disguised pork. The pork and the DAP were declared unconstitutional by the Supreme Court. The President fumed saying the DAP funds were spent for the public good. Including money given to lawmakers in disguised pork?
The President justified the DAP by saying it was created with good intentions. As good as saying “the road to hell is paved with good intentions.”
Here lies the anomaly of “under spending”. Before President Aquino created the DAP, the savings were basically used as bonuses and other monetary benefits for officials of state agencies and their employees. They were saving for themselves, not exactly to avoid wastage of taxpayers’ money. Every cent of their budget has a purpose and defended as such in budget hearings. The purpose was not attained. Savings resulted from it.
The President had to pool the savings to form the DAP. He had to do the spending himself but the Supreme Court declared the act as unconstitutional. How did it happen that the President is blamed for under spending but spent unused budgets as “financial rewards” for the bureaucrats and their minions? The savings should be returned to the Treasury and be used in the next General Appropriations Act. The President created a fund out of the savings instead.
The creation of the DAP is an act of appropriating taxpayers’ money which is a sole, exclusive function of the House of Representatives. That is the reason the Court declared the DAP as in contravention of the Constitution.
Having learned lessons from the Supreme Court decision, Balisacan now points out that government will plunge itself into overspending in 2015, presumably drawn from the P2.6-trillion GAA for 2015. No budget is ever enough for the needs of government. Necessarily, it will have to borrow.
There is no market economy in the world that has a balanced budget. The huge financial requirements for government services, particularly in the efforts to keep the economy going, necessarily incur huge public debt.
The problem with the Philippine government is it cannot spend enough. Therefore it borrows less, resulting in smaller interest payments and smaller budget deficits. Suddenly the chief economic planner says the government will go into massive spending in 2015.
The timing is questionable. The overspending will start at a time when national elections are less than two years away. Where will massive amounts be used? The NEDA did not say but it is presumed heavy spending will be on infrastructure and social services such as so-called social overheads in building more classrooms.
There is a law that prohibits public works spending months before the national election. The President or Balisacan missed the spending boat. Yet so much could be done in the rest of the term of Mr. Aquino, necessarily in a hurry to beat the ban.
They had all the time and the money to do it in the last four years. The government did not spend enough.
The economic planners suddenly woke up to the reality under spending punishes the economy in the form of slower growth. They want to make up for it but time is not on their side.
It is good to remember there was a time when the government was so strapped for money it had to accept excessive interest rates demanded by lenders. At one time in the reign of President Marcos the so-called Jobo Bills named after Jose B. Fernandez Jr., then governor the Central Bank, fetched annual yields of close to 50 percent.
Marcos had to plunge his country deep in debt to pursue an economic development program. He had to borrow at all costs. Of course it has to be stated that Marcos might have been responsible for putting his country in a financial bind.
The situation has so remarkably changed since then, particularly in the administration of President Aquino. At one time, the benchmark 91-day bill fetched a yield of one tenth of one percent.
Investors were looking for safe instruments for their money. Nothing is safer than sovereign liabilities.
The Aquino administration may have failed to take advantage of the low interest regime obviously satisfied the economy is growing with lesser borrowings, although it could have been spending much more to propel growth at a faster clip.
Now comes the chief economic planner saying the government will go into massive spending in 2015, obviously in recognition of the observation of the World Bank and the Asian Development Bank that the under spending slows down the rate of growth. The economic regulators might have failed to take advantage of excessive liquidity that helps sink interest rates. The government did not borrow enough as indicated by high — sometimes five or so times — over subscription of Treasury bills and bonds. Costs of borrowings -- pitifully low or intolerably high -- are never considered evil precisely because the state has to speed up expenditures for the economy to grow.
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email:amadomacasaet@yahoo.com
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