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Jul 09

The annual budget brouhaha

An interesting theme from commentaries overseas: a kind of all-pervasive mental and moral exhaustion afflicting national elites. Fin de siècle? The 1968 of our times (see contrasting views on that important year by Tom Stoppard and Tariq Ali; Filipinos had their 1968 in, well, 1970… it takes time for fashions to filter through…)? David Sirota thinks that in the United States, the possibility of a grassroots revolt ought to be considered:

America is in the throes of a powerful new uprising right now..

…this uprising is happening on both the Right and the Left. Like most revolts, it is rooted in a backlash to an Establishment widely seen as corrupt and morally decayed. This uprising has more picket signs and protests than pitchforks and pistols… It is a social phenomenon that is impacting all aspects of public life — our pop culture, our media, and most significantly, our upcoming national elections. It could take our country in a very different direction — perhaps positive (think universal health care, an end to the Iraq War, new trade policies), perhaps frighteningly negative (think immigrant bashing and a war with Iran).

Though today’s uprising has been going on since the two major explosions of the last decade — 9/11 and the Enron disaster — polls indicate that it is now intensifying in ways not seen before. Surveys reveal that the public despises its current president, and more importantly, that America is suffering a crisis of confidence in government as an institution. As Scripps Howard’s 2006 poll found, “anger against the federal government is at record levels” and “widespread resentment and alienation toward the national government appears to be fueling a growing acceptance of conspiracy theories” — most prominent being the one suggesting our leaders helped plot the 9/11 terrorist attacks.

The political topography resembles that of the last major uprising in our history — the one that took place in the 1970s. America then as today faced the same crises that have catalyzed uprisings since colonists tossed tea over the sides of boats in Boston harbor: among others, an energy emergency, a national security quagmire, a recession, a financial meltdown, and an attack on democracy.

As that uprising gained steam, Democrats nominated an outsider candidate for the presidency (sound familiar?). But when that outsider was elected he and the Democratic Party didn’t effectively represent that uprising – and that uprising did not go away. On the contrary, it became more intense. And by 1980, conservative organizers used the candidacy of Ronald Reagan to channel that revolt into the full-fledged conservative movement we’ve been living under for a generation. Over the next two decades, this conservative movement changed America domestically (tax cuts and social service cuts), internationally (massive increase in the military budget), and politically (wholly changed electoral map).

This same pace of change could be upon us again today — though one key indicator suggests the specific kind of change could be different. According to Gallup’s biannual survey of attitudes toward social institutions, Americans’ disgust with government resembles that of the late 1970s — but the variation between then and now is the antipathy toward Corporate America. Whereas in 1979 one in three Americans told Gallup’s pollsters they had confidence in big business, today a little less than one in five express the same confidence. In 1979, almost two out of three citizens said they had faith in banks. Today, only two out of five say the same thing.

The trend bodes well for progressives. Conservatives’ close affiliation with big business puts them at a disadvantage in the Left-versus-Right competition to harness the current uprising…

Of course, today’s uprising could be squelched completely, with neither the Right nor the Left capitalizing on it. Many institutions inside our government and our political parties exist specifically to crush populist, mass-based revolts.

Jared Bernstien responds by saying,

David is obviously writing about bottom-up uprisings, in many cases, movements that are a reaction to government failure. But in my experience, these groups eventually are demanding that the government alter its policies. So we’ve got to think on both bottom-up and top-down tracks.

And the problem for the top-down track is that government is in big trouble. I’m speaking at the federal level, but let’s not get too romantic about local cases. I haven’t seen much evidence that Albany works that much better than DC.

There are lots of reasons for this, but certainly one of the main ones is that if you elect people who explicitly prophesize that government is the problem, they will fulfill that prophecy with a vengeance. And yes, they’ll enrich their cronies along the way.

The problem cuts deep into the agencies… The depth of dysfunction is astounding, and it’s going to take years to repair.

David reminds us that our country was founded partly on “the right of the people to alter or abolish” destructive government. I’m in the “alter” camp, and I’d like to hear someone with David’s insights and movement experience hold forth on what it’s going to take to get there. What steps ought we be taking now that will ultimately give progressive uprisings a public conduit through which their goals can be achieved?

Are there echoes in how the police are despised, even attacked, in China? See Cracks in China’s Armor. Is this all in marked contrast, perhaps, to what’s going on in Thailand, where those formerly characterized as reformists are now advocating the dismantling of parliamentary democracy, according to The Asia Sentinel’s anonymous correspondent in Thailand’s “New Politics” Charade:

The New Politics turns out to be a startlingly reactionary proposal to move Thailand’s parliamentary system towards a form of appointed corporatism, or what might be called a selectoral democracy. Thirty percent of MPs would come from elections, perhaps one per province, and the rest of MPS would derive from various occupations and associations. Sondhi says the proportion is not fixed, it’s up for debate.

The rationale for wanting to dismantle Thailand’s electoral system is evident: pro-Thaksin forces keep winning elections. And as Thaksin is said to represent everything bad about Thai politics, he can not be allowed to wield power directly or indirectly. Thus, for Sondhi, and it would seem the PAD leadership as whole, there is now a need to bring about a revolution in political representation.

The idea of examining alternatives to electoral democracy is not without some merit, for it is common knowledge that massive amounts of money are required to win parliamentary seats, making parliament a millionaire’s playground and a source of further monopolization and corruption. It wasn’t always so, Sondhi told the rally. In the 1970s socialist politicians in Thailand could get elected on the basis of their ideology and popular support, but the emergence of dirty politics in the 1980s crushed any such possibility in the present.

The New Politics has interesting antecedents. The PAD leadership has clearly been speaking to military figures (this is now well documented in the Thai language press) who tried to stifle the emergence of parliament in the 1980s. Indeed, selectoral democracy nicely fits with corporatist visions of the old “Revolutionary Council”. The Council, to which General Chavalit Yongchaiyudh was said to have an association, held that elections merely led to parliamentary dictatorship and proposed a form of corporate representation to realize the “general will”.

A former communist, Prasert Sapsunthon, was the inspiration for this Thai appropriation of Rousseau, the French theorist of the social contract. Prasert became a leading intellectual among military circles calling for non-elective forms of democracy. When the Revolutionary Council effectively declared itself a provisional government during the political crisis of 1988 the elected Chatichai government took it to court for treason. It then faded into obscurity, but its ideas have never quite gone away, finding support among small rightist groups and even in some labor circles.

The New Politics is unashamedly pro-military and even codifies the conditions under which military intervention may occur. Sondhi has spoken of four conditions for military intervention: when charges of lese majeste are not acted on; when a government is incompetent; when corruption is rife; when a government betrays national sovereignty.

This has striking parallels to many discussions taking place here in the Philippines (e.g., “Should the military be kept out of politics or does military interventionism represent a deus ex machina moment to be ardently desired?” or “The problem with elections is that the electorate elects idiots”, see smoke and Verisimilitude), and reminds me of something I brought up when Adrian Cristobal died: the enduring triumph of Marcos’ concept of a New Society helps explain why Edsa contained the seeds of its own destruction.

The papers today report P1 hike for jeepneys, buses; P10 for taxis. The transport sector has to be placated. Senator Escudero lays down the basis for the next round of placating -of workers- as reported in Inflation cancels wage hike; hope pinned on new law. The Catholic bishops have to be placated, too: Gov’t open to lowering, not scrapping, EVAT on oil.

The problem of course is that soothing all these sectors requires money, and proof of the President putting the nation’s money where her mouth is, will be in the national budget.

Former national treasurer Leonor Briones in her column says something germane to yesterday’s entry (and the foreign commentary above), this time from point of view of economists:

Last week, I talked to two eminent economists. One drew a picture of the gathering of a perfect economic storm. To him, all the signals are already making themselves felt: increased unemployment, accelerating inflation, escalating prices, capital flight, and rise in poverty levels. The social consequences of the economic storm are also building up: increase in suicides, rise in criminality , social disintegration, and loss of hope.

So how come people are not rising in anger? The other economist said that all these negative developments did not occur in one fell swoop. They were building up, one after the other. By the time the perfect economic storm sweeps the country, people will be so weakened they will not have the strength to bestir themselves and take action.

She also happens to think Arroyo’s hold on funds, spending habits ‘dangerous’. One presidential habit I’ve heard about, is that the President travels with a stack of blank government checks when she drops in on local government officials; she then fills in these checks personally, a habit that apparently gives professional bureaucrats the Willies.

Anyway, in her column, Briones says the executive department has to redo the proposed national budget, because the macroeconomic assumptions that served as the budget’s parameters have become obsolete in the months since the Budget Call was made in May. Among the assumptions made were: singe-digit inflation, a balanced budget by this year, and a Peso-Dollar exchange rate of 40 to 43 to 1.

The Inquirer editorial for its part, says that real oversight over the national budget is a Mission impossible.

Anyway, the Palace propaganda machine has begun testing potential messages for the State of the Nation Address. If the Palace number-crunchers are, well, number-crunching furiously now, to come up with new economic assumptions for the national budget, Governor Joey Salceda is also batting for his economic plan by claiming it has presidential approval.

So we can expect the budgetary process to pop in and out of the news in the coming weeks and months. For a closer look at the entire process, visit The Philippine Center for National Budget Legislation. And here’s their book: CNBLbook.pdf which provides a crash course in understanding how the budget’s put together, and what it contains. (The Department of Budget and Management website also makes available the Budget Call for 2009 and last year’s national budget-related documents: the General Appropriations Act for 2008, which was based on the President’s Budget Message for 2008,with supplementary material: the National Expenditures Program FY 2008, Staffing Summary FY 2008 and Budget Expenditures and Sources of Financing 2008.)

I’ve reproduced some charts from the Philippine Center for National Budget Legislation’s book, and supplemented them with some charts I prepared for my show.

The first thing they point out, is that the Executive Department dominates the national budget, with the ratios more or less constant. The 2004 budget, for example, has 68% of the monies devoted to, and in the hands of, the Executive Department, with the next-biggest chunk devoted to debt payments, and a relatively slim percentage for the legislature, the judiciary, and constitutional commissions.

2004.jpg

The PCNBL helpfully presents past budgets in a color-coordinated manner:

oldgaa.jpg

And then explains what the color-coding means:

newgaa.jpg

Most members of Congress spend their time on the yellow portions, and sometimes run out of time to adequately look into the blue portions, which are meant to supplement the expenses of government offices (in yellow). The blue portions are called Special Purpose Funds, and as this chart shows, they total more than what’s spent for the established offices of the government:

spf2008.jpg

A page from the book explains why Alleba Politics, for example, can complain that the National Government is in arrears to the City of Davao, to the tune of 142 million pesos:

lgu.jpg

lgu2.jpg

Special Purpose Funds are entirely in the hands of the President, who decides when they’re released and to whom -and this includes the pork barrel funds of members of Congress (a surprisingly slender 3% of the whole) as well as the revenue allocations of Local Government Units. In a sense, then, aside from the fixed (because tied to government’s obligation to fund existing employees and offices) national budget, there is a parallel national budget, one bigger than the fixed budget and purely within the discretion of the chief executive.

This chart shows that of these funds, the biggest chunk is for “Unprogrammed” Funds.

spfbreakdown.jpg

These are, in a sense, promissory funds: if they come in, then they can be spent for certain purposes, still pretty much at the chief executive’s discretion. The book explains this in detail:

unprogrammed.jpg

These “wish ko lang” funds, in turn, have been growing, percentage-wise:

unprogrammed2.jpg

The book provides a glimpse of the budgets and expenses of the major agencies of the government. By way of illustration, here is a set of charts featuring expenditure programs for the different branches of government, and including samples of two constitutional bodies we all adore, the Comelec and the Ombudsman:

op.jpg

ovp.jpg

congress.jpg

judiciary.jpg

comelec.jpg

ombudsman.jpg

Then there’s a focus on some issues raised by the allocations for various departments and their flagship programs, for example:

deped.jpg

dnd.jpg

dnd2.jpg

dar.jpg

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As well as an introduction to lesser-known budgetary practices such as earmarking funds. One example the book focuses on is the Motor Vehicles’ User’s Charge, which the group says is the third-largest source of revenue for the government, with a tremendous amount collected in a few years:

mvuc1.jpg

The charge, levied on vehicle owners, is meant to be specifically used -or earmarked- for a specific fund, with four main programs funded by it:

mvuc2.jpg

Subject to two departments:

mvuc3.jpg

Here’s the introduction to the fund in the book:

dpwh.jpg

dpwh2.jpg

The organization hopes that their book will enable congressmen to deliberate on the budget more wisely and efficiently, and that it will inform the public so that it can keep tabs on budget preparation and execution.

250 comments

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  1. nash

    what is more important is the year-end report.

    how is it that senators and congressmen and the executive do not submit a DETAILED report on where the spent the money (and no rounding off to the nearest 1000 please.)

    in the UK, with the right to information act, you can look up how much so and so MP paid for taxi or take-away dinner. why can’t we do the same given that congressmen are even overstaffed?

  2. BrianB

    Suddenly everyone’s a disciple of Hegel. Maybe the simple answer is George Bush. He made us all reformists.

  3. PSImeon

    The annual budget show-and-tell is a charade. This is the time when the “people’s” representatives get to bully the mandarins of the different executive departments, get a friend or relative employed as consultant or contractual, get a road or bridge built nowhere, etc.

    After getting these small pickings, the Executive branch gets the Big Bucks.

  4. PSI

    Correction:

    After “giving” these small pickings…

  5. DevilsAdvc8

    nash, because Filipinos for the most part, dislike social friction. and that one is ONE BIG SOCIAL FRICTION.

    btw, if i were speculating, i’d say it’s time to buy a pack of horses and breed them continuously.

    i’m inclined to buy one of my own. hey, we gotta prepare for when the cars stop moving!

    advice to sulpicio: invest in steam boats

    advice to cebu pacific: invest in air balloons

    advice to puv drivers: invest in kalesas

    advice to GMA: invest in indulgence

    so i think the terrorist bogeyman is just that. in a few more years, all these ME/oil-producing/terrorist haven countries will be dirt poor once again.

    OIL is finite. STUPIDITY is not. and foresight, a rare commodity.

  6. UP n student

    to nash : the reason why in the UK, with the right to information act, you can look up how much so and so MP paid for taxi or take-away dinner. why can’t we do the same given that congressmen are even overstaffed?

    is that Pinas congress has not passed a Right to Information Law. And it is because the masa people-majority 😐 (maybe with collaboration of the middle-class) keeps electing/re-electing Pinas congressmen and senators who do not see wisdom to passing a Right to Information Law.

  7. nash

    but don’t we have Freedom of Information act or something…

    besides, I saw our congressman publish a year end accounting report but everything was rounded off to the nearest 1000 so hindi kapanipaniwala..

  8. nash

    ok found it, Article III Section 7 of the constitution.

    but you are right, this in no way FORCES senatongs and tongressmen to do correct accounting

  9. supremo

    ‘OIL is finite.’

    Agree but oil revenue is not if invested properly. Abu Dhabi’s sovereign wealth fund is estimated at $800 B. The fund is financed by Abu Dhabi’s surplus oil revenue. They recently invested in several financial companies. They also bought the Chrsyler building in NYC.
    The Philippine government receives royalties generated from Malampaya natural gas ranging from $400 million to $600 million from the P1.37 per kilowatthour royalties levied by the government for natural gas. Where is the money now?

  10. BrianB

    Nash,

    Even plain old freedom is debatable, freedom of information pa kaya? Inherent in laws is the fear among the people of punishment. With politicians, punishment against them is adjustable to tolerable levels.

  11. UP n student

    Oil of the Middle East is another instance to question this “There is a god” thing. Just look at the map!!! After the Jews crossed Sinai from Egypt, Moses could have been instructed to head North, South, East or West. Had Moses been directed “Go east!!”, the Jews could have planted their flag in Iraq, Kuwait or Qatar. Had Moses been told to walk south, the Jews could have planted their flag onto Saudi Arabia. So Moses was NOT told to go west (back to Egypt and harakiri — bad choice), but North was no whoopee-doo, either.

    There are few spots in the Middle East without oil, and onto one of those few spots, Moses was told to go. 🙁

  12. nash

    Ok lang yan UP n. God loves us too.

    How many Miss Universe contestants have won honour and glory for our beloved country? Meron ba from the Middle East? Wala.

  13. BrianB

    Is that a bad thing? Without oil, Israel managed to become the most advanced and educated nation in the Middle East. Besides, Middle East oil has only been king for 50 years. And there is a GOd, for imagine if they had established Israel and built their monuments on oil-rich areas.

  14. supremo

    ‘Without oil, Israel managed to become the most advanced and educated nation in the Middle East.’

    No need for oil. US aid is good enough.

    http://usembassy-israel.org.il/publish/mission/amb/assistance.html

  15. supremo

    ‘Oil of the Middle East is another instance to question this “There is a god” thing.’

    The Philippines has oil in Sabah.

  16. UP n student

    To get back “on point” about the budget (and my concern is more moneys due the LGU’s):
    The figures about Pasay LGU raises questions. For 2007, is it for real that the National Government shorted Pasay LGU to tune of P66.7-million? Did Pasay sue, or did Pasay just make press releases?

  17. UP n student

    my definition of “for real” is that there is an enabling law which, if applied, would have forced the National government to turn over to Pasay the P66.7-million. “No law” means fault lies with a lazy irresponsible Congress. “Yes, there is a law” means fault lies with double-dealing Malacanang.

    And if Pasay has not sued at all, then fault lies with lazy Pasay, too.

    Money is a hardball game. No room for lazies.

  18. UP n student

    The Philippines has oil in Sabah. :supremo

    All religions have depicted their god as using war as a medium-of-instruction. Religion-books written-by-men have passages where the Power Over All has shown favor to a community of people by letting a people win key battles, disfavor by allowing this community to get humiliated, even annihilated in battles.

  19. BrianB

    Stories of hope in times of crisis.

    http://dailystrength.org/blog/182-8-crazy-stories

  20. d0d0ng

    Wow, 68% of the national budget is spent by the President. The special purpose funds which are entirely discretionary by the President are bigger than the line department budgets.

    In addition 40% of the special purpose fund is unfunded and in 2008 it balloons 5 times the 2004 amount.

    President Arroyo is taking dividends on her risk-taking adventure in 2004 (Garci tape) election. Not bad as an economic doctorate but showed her flair talent in cooking from 2004 election, pay&kill impeachment to special fund cash machine menu. No wonder, we have that paper bags of money in Malacanang left for the bishops and nobody claimed the source.

  21. d0d0ng

    This is what my uncle wanted me to do – finance (buy the voters) his political ambition. He guaranteed the return. Since then I became an enemy – no family loyalty. I was totally shocked that my father sided with my uncle.

    It is not hard to see how he can guarantee. I mean the President is picking up the tab on 59 hardworking honorable congressmen who accompany her to the recent US trip for pleasure. Just like that – courtesy of Presidential discretionary special funds.

  22. mlq3

    upn, the enabling law is the local government code.

    http://www.dilg.gov.ph/LocalGovernmentCode.aspx

    i don’t think pasay did a press release or sued. but also, the incumbent (opposition) mayor was also replaced and that may have taken care of that. the president is immune from suit, and we don’t have the practice of local governments suing the national government -it’s asking for trouble. even davao, with a fiercely independent mayor, has to plead its case of being shortchanged.

  23. KG

    following leytenian’s theme song:

    about 62.3 percent of our gdp goes to our public debt
    no big deal zimbabwe has almost 200 %of it gdp go to debt.

    some say, our gdp was bloated last year, then that could reach the 70-80% level

    most if not all of it are automatically appropriated and what is worse is we borrow in order to pay.

    a portion of hvrds comment (nov 2005)

    . That is why we always run out of dollars because we have in reality a trade deficit in merchandise that runs to close to $10B a year. In spite of all the dollars we aearn in exports and remittances we still have a foreign debt of $60 billion. The BSP often boasts that we have $15 billion + in official reserves and another $ 15B + private bank accounts. Do the math. If we earn close over $15 billion in dollars every year why are we in debt to ther world?

    the foreign debt is still above 60 billion:62.84 ;2007 estimate
    hvrds comment was november 2005

    digressing as I always do segue….

    his observation on the subprime mortgage crisis yet to come is dead spot on:
    Till today the State subsidizes mortgage rates in the United States to make cheap housing available to all.

    I have a question if the uS subsidizing mortgages resulted to subprime crisis; what will an oil price deregularization and other subsidies like nfa rice, do to us?

    walang epekto,sanay na nama tayo sa crisis eh.

    another segue….

    Our actual budget deficit counting the AAL is about 3-4% of total GDP.
    All this talk about a balanced budget did not take into account the AAL.

  24. BrianB

    Evolution?

    Useless concept since cause of evolution is not human will. If you are tired of the word “reform” it’s no excuse to use a general concept that has little bearing to human struggle. How do you, for example, force businesses to evolve. Businesses like to use the term too but they don’t really mean “evolution” do they. In fact they overuse the word.

    Evolution, Manolo, has nothing to do with the choices we make now; evolution simply happens. Forget this concept, it will only distract you.

  25. Bencard

    upn, i believe an action for mandamus to collect pasay’s or davao’s revenue share would lie against the national government.

  26. KG

    again with the typos grrr…

    will the next admin stop porkbarrel?ano tayo,hilo?

    bakit sa mga dyaryo karamihan me utang sa local government ay national govenrnment?tapos malaking bagay talaga ang IRR pag di umabot.

    saan babawiin ng local government yan e di sa businesss permits at ang mga empleyado sa daily transactions. ang mga tao din naman di dinedeclare ang actual income dalwang pisong sedula lang ang kinukuha(di naman lahat)

    sorry the world is full of cynics.
    call it a feed back non loop.how can it be a circle di naman natin kausap ang gobyerno. tayo tayo lang.

    i am a consultant for the senate,ano silbi nun,so what?
    sure liam is a government employee,now what?
    malay natin me iba pa dito,but we respect their privacy,yung ke hvrds ,nasimulan ko na eh, at di ko naman alam ang private life nya at wala naman akong balak alamin ;kaya tama na na alam ko ang pangalan nya.mas marami panga akong alam sa mga nagsahare kahit di ko alam pangalan nila tulad ni d0dong at bencard.si devil’s open yan dahil friendster account ang link nya,but we have the discipline not to pry,ako nga nagpa add pero matagal na akong di nadadalaw profile nya.so there it is you can also see me at friendster thru devils.

    all our discussions are that, for the sake of discussion.

    tulad ng sinabi ko sa mga proponents ng the value chain has changed because of the internet…

    we are not yet there

  27. UP n student

    to mlq3: i understand that the president can not be sued, but the Executive Branch can (or at least, it should be able to get a case to the Supreme Court that requires the Executive Branch to act consistently with the Constitution or with laws that have been judged to be consistent with the Constitution). But now that I’m typing this response, it occurs to me that Pinas mirrors what is probably also happening in Poland, Turkey, Zimbabwe, China, Egypt, Poland, Greece, Thailand, Indonesia or Saudi Arabia and practically all other countries — the EXECUTIVE BRANCH has practically 95%-authority over government checks.

    The only exceptions I have read about will be USA (the federal government has lost to suits by states, cities, even Indian tribes) and Australia, too.

  28. BrianB

    This is what I’ve been using on this blog for the last year:

    http://www.theonion.com/content/video/today_now_how_to_pretend_you_give

  29. leytenian

    KG,
    “I have a question if the uS subsidizing mortgages resulted to subprime crisis; ”

    The answer is NO. The reverse happened when subprime mortgagors defaulted their loans, the government then started a program- subsidizing borrowers to keep their homes thru FHA or VA loans but at the current market value.

    There was no regulations until the bubble burst then the oil crisis.. It all adds up to a bigger problem in the US. Greenspan lowered interest on home borrowing during the buyer’s market. That contributed a lot of problems. City government where slow on building permit thus demand of homes exceeds supply, pushing home prices to go up… It was not a good combination. I am a victim of these. I have lost all my money… hahahah

  30. KG

    How to pretend to give a shit about the elctions….

    That reminds me of one commenter and his blog si Comelec ako aka a street name in intramuros: postigo

    ano kaya ngayari sa kanya? sana di sya yung isa sa nasa news na nadali while crossing the street.

  31. leytenian

    Arroyo is an economist. She doesn’t know finance nor accounting. She also do not know simple finance strategy and how to grow our country using debt financing. Simple finance .. if we borrow at 8% but then create a project that makes over the 8% like even 15%… then borrowing money make sense. our country is borrowing for projects with no actual return or the return is less than the 8%. those projects are recommended and discussed by Congress and all the executives. Majority have one common skills. Getting commission.

    If we cannot grow the borrowed money more than the interest …. then my theme song will be very popular for the next 100 years.

  32. leytenian

    a good example of project with negative return… a congressman is now on its way to construct a 180 million pesos bridge . his reason is to expedite transport of goods by short cutting route and maybe saving gas…( idiot) .

    he does not understand that the island has no way of getting revenue from employment that will exceed the 180 mil budget in the next 5 or even 10 years… this project is a poor investment with negative returns
    any bridge or new roads must have tolls to get our money back… but in the provinces… hello where’s the finance and accounting skills i’m talking about. even if the bridge will provide extra 10 million revenue a year from little employment and credit to his lousy project, 10 mil divided from 180 mil, will take 18 years to break even …by the time 18 years come, the bridge will need upgrading due to poor maintenance and maybe will collapse if our natural resources and lack of trees are poorly managed causing landslide…
    i’d rather put that 180 mil to buy stocks and sit doing nothing and watch it grow at 8% or 12% annually.
    8% of 180 mil will generate 14.4 mil a year. better than the 10 mil example…
    A project must have projected income statement and break even analysis. Employment must be created and its revenue must be considered if such project will yield positive return.
    I have heard that congressmen will purposely create projects to get budgets. That pork barrel is an attraction and a motivation. Cut it off.

  33. hvrds

    A simple way for explaining wealth. One is wealthy when one has the power to/of command over labor.

    The government confiscates property by statute. So the power over the public purse comes with the power to command. That is the heart of political economy.

    In reality and practice the chief executive in the Philippines has almost absolute power of command over the entire public purse and indirectly the market.

    1. The GAA is composed of salaries of the three branches and all constitutional agencies. The President is the appointing power of the two higher courts, the heads of Constitutional agencies and GOCC’s. The electoral system is heavily influenced by the power of the purse over the legislature and the Local government revenue allotments.

    All GOCC’s that are cash cows are directly under the Presidents control. SSS, GSIS, PAGCOR, NAPOCOR, PNOC.

    2. The GAA ic composed of all interest payments of the national government.

    4. The GAA is composed of the budget for supplies and maintence of all three branches.

    5. The GAA is composed of the budget for IRA for LGU’s

    6. The GAA is composed of the budget for capital outlays for public goods.

    Where is the oversight and public accountability for all the above???????

    Not included in the above is the AAL that cover principal payments that are simply revolving.

    Now on the the other components of the total public sector debt both actual and contingent

    GOCC debts. LGU debts. BSP debts.

    Contingent debts – Private sector debt in dollars and all foreign investments.

    The Philippines goes into debt to feed cloth and shelter itself.

    It has almost no fiscal flexibility except to keep its IMF credit rating active. That comes at a heavy price to economic and political sovereignty.

    In reality our main foreign creditors have the power of command over the Philippines.

    The neo feudal state of this country simply enables our landed to collect rent .

    A perfect example is the twist in leasing land to the Chinese . It had become politically untenable to lease land directly to the Chinese state. So you simply use a project using one of the main pirincipals of Greater China. Kuok. He is a major agricultural food trader and happens to own and control the Coca Cola company in PRC. His main product is sugar.

    This is not about producing agricultural products for pinoys. This is for producing products primarily for export.

    The BSP signed currency swap agreements with Japan,. S. Korea and China as an added buffer for reserves.

    The BSP has been forced to dip into these swaps to slow the depreciation of the peso as oil bills have surged.

    The preconceptions about physical colonization by major powers is passe. That ended towrds the end of the 19th century when the world was almost totally colonized.

    One can use the power of wealth to command over poorer countries.

  34. cvj

    A perfect example is the twist in leasing land to the Chinese . It had become politically untenable to lease land directly to the Chinese state. So you simply use a project using one of the main pirincipals of Greater China. Kuok. He is a major agricultural food trader and happens to own and control the Coca Cola company in PRC. His main product is sugar.

    This is not about producing agricultural products for pinoys. This is for producing products primarily for export. – hvrds

    Leytenian, with reference to our previous discussion on what the ‘catch’ could be (in SMC’s Feeding the Future initiative).

    http://www.quezon.ph/1877/victory-gardens-and-that-perfect-storm/#comment-861691

    I believe hvrds’ comment above may provide the answer.

  35. hvrds

    For the owners of monopoly capital there is no nation state. There is only profit. Under the era of financial liberalization the Philippines openend up its economy and repealed the unfirm currency act. It opened up its cpaital account and today the country is deeper in debt. Our welathy do not need to keep their wealth in Philippine assets any longer. They all leverage their foreign stashs to do business domestically. Our elite are actually the largest foregin investors here. They get better protections as foreigners here than as domestic investors.

    The rendering of the social contract of nation states.

    …………..growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered. As one prominent chief executive put it in Davos this year: “We will be fine however America does but I hope for its sake that it will cut taxes and reduce regulation and put more pressure on young people to study in the ways that are necessary for it to be able to keep competing successfully.”
    “The chief executive was sincere and he captured an important truth. Even as globalisation increases inequality and insecurity, it is constantly and often legitimately invoked as an argument against the viability of progressive taxation, support for labour unions, strong regulation and substantial production of public goods that mitigate its adverse impacts.”
    Lawrence Summers

    FDR raised the top rate of a progressive income tax to 90% at the start of the war years. That lasted till the government of JFK. That was the period that saw the rise of the American middle class.

  36. hvrds

    For the owners of monopoly capital there is no nation state. There is only profit. Under the era of financial liberalization the Philippines openend up its economy and repealed the uniform currency act. It opened up its cpaital account and today the country is deeper in debt. Our welathy do not need to keep their wealth in Philippine assets any longer. They all leverage their foreign stashs to do business domestically. Our elite are actually the largest foregin investors here. They get better protections as foreigners here than as domestic investors.

    The rendering of the social contract of nation states.

    …………..growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered. As one prominent chief executive put it in Davos this year: “We will be fine however America does but I hope for its sake that it will cut taxes and reduce regulation and put more pressure on young people to study in the ways that are necessary for it to be able to keep competing successfully.”
    “The chief executive was sincere and he captured an important truth. Even as globalisation increases inequality and insecurity, it is constantly and often legitimately invoked as an argument against the viability of progressive taxation, support for labour unions, strong regulation and substantial production of public goods that mitigate its adverse impacts.”
    Lawrence Summers

    FDR raised the top rate of a progressive income tax to 90% at the start of the war years. That lasted till the government of JFK. That was the period that saw the rise of the American middle class.

  37. Jeg

    “The problem with elections is that the electorate elects idiots”

    It’s more complicated than that. Our system has been so thoroughly gamed that ‘the people’s sovereign choice’ is based on… nothing. There is no rational way on which a voter can base his or her judgments. It’s not that the electorate elects idiots; it’s just that the electorate doesnt have enough information, and let’s be blunt, the electorate often doesnt know what to do with the information even if they did have it.

    There’s also a psychological component. Ive read an article by Conrado De Quiros where he said GK’s Tony Meloto would make a good president, but added that Meloto would probably not want it. (He doesnt, as his speech posted in Expectorants says.) The problem is this: Power is more attractive to the evil man than it is to the good man. An evil man will actively seek it, a good man will shun it. Good men (and women) who are thrust into positions of power do so reluctantly, and would give it up as soon as they can. Evil men (and women) seek it, chase after it, and cling to it if allowed to do so by the people whom they govern; would cling to it if they could get away with it. And if they couldnt, would see to it that their ilk, their cronies, their relatives, their friends, their coterie of evil, would continue in their stead. We are more likely to have a bad government than a good one.

    This doesnt mean that all who seek positions of power are evil of course. Im sure there are those who are actually good and would like to see change. It’s just that the electorate wouldnt know one way or the other.

  38. cvj

    Jeg, that fundamental uncertainty about how a candidate will perform once elected is what makes any “let’s move on” or “let’s wait for 2010” approach stupid. That we are electing an unknown package is the reason why there should be more people participation in between elections (either individually or via NGO’s) to make sure that promises (either in tone or substance) are kept. After all, even Tony Meloto (if he decides to run), Martin Bautista or our host (if he changes his mind about elective office) can turn out to be the devil in disguise.

    While you may have a nuanced view about the electorate, i don’t think it is shared by many in the Upper and Middle Class. I think proposals to regulate elections on their part stem from their feeling of powerlessness in the face of the masa’s numerical advantage coupled with their own sense of intellectual superiority.

  39. UP n student

    Kuok: This is not about producing agricultural products for pinoys. This is for producing products primarily for export.

    Consistent with the Canadian farmers’ observation about loony agricultural policy in 3rd world countries, using farmland to produce flower for export while its national government buying grain from Canada, US, Australia to feed its population.

  40. KG

    that fundamental uncertainty about how a candidate will perform once elected is what makes any “let’s move on” or “let’s wait for 2010″ approach stupid. That we are electing an unknown package is the reason why there should be more people participation in between elections (either individually or via NGO’s) to make sure that promises (either in tone or substance) are kept.

    http://www.quezon.ph/1903/the-annual-budget-brouhaha/#comment-862949

    CVJ, An exerpt of Manolo’s article. I am also basing this from your past comments,not only the one cited above.

    .Beware of those whose orientation is revolutionary instead of evolutionary. Our revolutionary experience has been derivative and essentially destructive. We were the last of the Spanish colonies to revolt in the 19th century; and it became a revolution led by those who viewed leadership as theirs by right; our First Quarter Storm came two years after the rest of the world was convulsed by student rebellions in 1968 and shocked the rest of society into embracing martial law; and we are among the last nations still blighted by a Maoist revolutionary movement: in both cases led by those who believed in the primacy of zealotry.

    It is in democracy-building that we’ve been cutting-edge; we were the first of the colonized nations to peacefully reestablish our independence; we gave the world People Power to “restore democracy by the ways of democracy,” and so we must, in turn, be among the first to transform People Power into something that strengthens, and doesn’t weaken, democracy.

    This realization, I believe, lies at the heart of our not having an EDSA People Power IV.

    http://opinion.inquirer.net/inquireropinion/columns/view/20080710-147466/Embracing-evolution

  41. Jeg

    Yes, that’s the problem. The mutual mistrust between the upper/middles and the masa. The middles especially, since they are the ones who are more in contact with the masa. They have abdicated their traditional role as leaders of the masa and instead identify themselves with the uppers. (Our heroes of the Philippine revolution of 1896 were from the middles.) The masa is now a problem to be solved rather than a power we can use in building the nation.

  42. cvj

    Jeg (at 12:05pm), very well summarized. IMHO, that’s EDSA Dos vs. EDSA Tres in a nutshell carried over to Hello Garci and Let’s Move On.

    Karl, on “restor[-ing] democracy by the ways of democracy” i agree with Manolo.

    http://www.quezon.ph/939/round-2/#comment-25701

  43. leytenian

    cvj,
    On hvrds comment : catch? yeah… there some good points there.

    sounds like kuok has it all. He understands very well that Philippine government guarantees any loan. if kuok invest a little , he will make more. when he makes more, the government will also make ( in the return of numbers, I’m not talking on return of production to our local farmers) .. shangrila has proven itself to be profitable. probably the best 5 star hotel in asia. there’s a good point for our government to invest with the company. if i am an individual , i will buy its stocks.
    for our farmers, the government can continue its subsidizing strategy plus on going training.

  44. mab

    The bulk of our annual budget goes to debt servicing (P700+ Billion for 2006 and increasing for 2007 and onwards). I think its a matter of time that our government will be “lubog sa utang” and its showing now under the present multiple crisis and tragedies (oil, rice, food, typhoons, etc.).

    As quoted by mlq, former national treasurer leonor briones’ “..a picture of the gathering of a perfect economic storm. To him, all the signals are already making themselves felt: increased unemployment, accelerating inflation, escalating prices, capital flight, and rise in poverty levels. The social consequences of the economic storm are also building up: increase in suicides, rise in criminality , social disintegration, and loss of hope…”.

    That perfect storm, far worst than Typhoon Frank, is just around the corner. You will know it because government is panicking now on where to source the funds to feed the multiplying numbers of poor Filipinos.

    Yet their pockets and bank accounts are already full and even some “in positions” have penchant for luxury…Per Lito Banayo’s column in Malaya one well connect pol already bought a citation jet after making a bonanza from mining… and there are a lot more of them hitting jackpots from…

  45. leytenian

    but on a different idle land and continue with agrarian reform.

  46. KG

    Indeed ,you have an elephant’s memory. even with google you have to know what you are looking for first.

    agree with the involvement of ngo’s role,rather than us treating the catholic church as an ngo and just relying on them to do the talking for us. if they succeed some call them fascists.

    the ngos’ role could be more powerful if the one’s doing the oversight can find a way to make things happen.

    the ngo should also not let us down; we have the consumer price watch;which says that there would be continuous oil price hikes;how encouraging.

    we have the makati business club that keeps on saying, the government has a bad track record in running business so it should stay away from it.

    we have the local green peace,who knows nothing but to paralyze the power sector with out ensuring that alternative energy should be in place first; blackmail won’t solve anything.

    takutan,bluffing,exposes; that is the name of the game with the ngos and we deserve better.

    That goes for the government , as well.

  47. hvrds

    “This realization, I believe, lies at the heart of our not having an EDSA People Power IV”

    We have temporarily solved the perennial problem of a serious BOP crisis which was the proximate cause of both Edsa I and Edsa II.

    The 1972-73 BOP crisis which actually saved and gave Marcos the proximate cause to declare martial law was caused by the most massive debt default and repudiation by the U.S. (in gold) the planet ever experienced. The problems started building up in 1968.

    All major political events and turbulence in the Philippines were a result of outside events.

    The investment banker Ting Roxas had written a good book on it during the height of the Erap crisis. Ting Roxas was the head of DM’s economic managers then.

    Big Mike and GMA spent money like drunken sailors during the period 2001-2004. They were taken to task in 2004 (after elections). But once in power she put the hammer down for the people to pay for what she did to gain that electoral victory.

    Roxas’s own personal experiences since the time of Decontrol till today gives one a pretty good insight that we really are not in charge of our own destiny in the Phils.

    The events that are transpiring today is a reminder that outside events forces government to react.

    Equilibrium scientists are by their own nature reactionary. They are natural agnostics. They are taught that economic science is measurable like the physical sciences.

    Hence today you have NEDA who are staffed by equilibrium scientists who do not believe anything that is not physically measurable.

    That is why there are no accurate measurements of poverty here in the Philippines.

    Since the government does not have the means or funds to collect and maintain hard data they simply make guesses and fashion accounting constructs as instructed by multilateral institutions that insist on having quantitative measurements.

    Subsequently you have a rigged set of figures that purport to show a national economy growing but in reality there is no integrated linked division of labor between the three main sectors of the economy. It simply does not exist. The passenger jeepney is an apt metaphor of the national economy.

    We are closer to becoming a failed state than a successful one. Our neighbors including Vietnam are better placed to becoming successful states.

    MLQ3 description of GMA traveling with blank checks is proof positive that she knows that you buy loyalty in this country.

    She has set up the model for the one to follow in her footsteps in 2010.
    The closest to her model is Villar. Mukha pang artista. Just watch him use his wealth to buy the Presidency.

  48. UP n student

    leytenian : I can think of three to five organizations that will want to lease 1-million hectares and not ask for guarantees from the Philippine government. Won’t even need agriculture-quality land. Pick the right one, and dollar-kickbacks to Yap not likely.

  49. UP n student

    to cvj: did you really give in a round-about fashion agreement to Jeg’s statement :

    The masa is now a problem to be solved rather than a power we can use in building the nation.

  50. hvrds

    The GSE government sponsored Enterprise that is Fannie Mae and Freddie Mac is in trouble.

    July 10 (Bloomberg) — Borrowing at Fannie Mae, the government-sponsored mortgage company, has never been so expensive and it may not get better any time soon.

    Fannie Mae paid a record yield relative to Treasuries on the sale of $3 billion in two-year notes yesterday amid concern the biggest provider of financing for U.S. home loans won’t have enough capital to weather the worst housing slump since the Great Depression. The company’s credit-default swaps show traders are treating the AAA rated debt as if it were five steps lower. Fannie Mae shares tumbled 13 percent yesterday in New York to the lowest level in almost 14 years.

    Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae’s assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said.
    “Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole, 71, who left the Fed in March, said in an interview.

    Fair value accounting measures a company’s net worth if it had to liquidate all of its assets to repay liabilities. Fannie Mae and Freddie Mac, both of whom have the implicit backing of the government, make money by borrowing in the bond market and reinvesting the proceeds in higher-yielding mortgages and securities backed by home loans.

    `Inflection’ Point
    Lawmakers in Washington may question Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson at a 10 a.m. hearing today about the financial health of the companies and whether they jeopardize the financial system.

    “At some point we’re going to reach that inflection, where the government is going to have to either guarantee explicitly or Fannie and Freddie are going to have be left to fend for themselves,” Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York, said in an interview with Bloomberg Television. “We’re getting to that point where a decision has to be made by Washington.”

    The plunge in Fannie Mae and Freddie Mac yesterday in New York Stock Exchange trading led financial shares to their biggest decline in six years and sent the Standard & Poor’s 500 Index into its first bear market since 2002. Fannie Mae shares dropped $2.31 to $15.31 and Freddie Mac declined $3.20 to $10.26, a decline of 24 percent.

    `Well-Capitalized’
    The government is counting on Fannie Mae and Freddie Mac, which own or guarantee about half the $12 trillion in home loans outstanding, to help revive the housing market. Congress lifted growth restrictions on the companies, eased their capital requirements and allowed them to buy bigger “jumbo mortgages” to spur demand for home loans as competitors fled the market.

    Paulson said on July 8 he was pleased with Fannie Mae and Freddie Mac’s efforts to raise capital. Bernanke said the same day the firms need to be “strong, well-regulated, well- capitalized” to provide credit “without posing undue risks to the financial system or taxpayer.”

    “We are managing our business and maintaining a capital position that will allow us to fulfill our congressionally chartered mission now and in the future,” Brian Faith, a spokesman for Fannie Mae, said.

    Poole is “a long-time critic,” said Sharon McHale, a spokeswoman for McLean, Virginia-based Freddie Mac.

    “Freddie Mac is doing exactly what Congress intended when it chartered the company and, more recently, when it passed the Economic Stimulus Act,” McHale said. “We are well capitalized and positioned to continue to serve our vital housing mission.”

    Government Ties
    While leading the St. Louis Fed, Poole roiled markets in 2003 when he said the government should consider severing its implied backing of Fannie Mae and Freddie Mac and said the companies lack the capital to weather financial market disruptions. In 2006 and 2007 he called for lawmakers to strip Fannie Mae and Freddie Mac of their charters.

    Congress created Freddie Mac and expanded Fannie Mae in 1970 to promote home buying in the U.S. The companies’ charters give the Treasury the authority to buy as much as $2.25 billion in each of their securities in the event of possible default.

    The government will likely be forced to take over the companies because of the mortgage meltdown, Poole said.
    “We know in a crisis the Federal Reserve tap would be open,” said Poole, now a senior fellow at the Cato Institute.

    $20 Billion Raised
    The bailout of Bear Stearns Cos. by JPMorgan Chase & Co., arranged by the Fed, demonstrates the government’s unwillingness to allow “large, systemically important” financial institutions to fail, he said. Bear Stearns collapsed after customers fled amid speculation the company faced a cash shortage.

    “I worry about those institutions,” retired Richmond Fed President Alfred Broaddus said. “They are huge. They dwarf the Bear Stearns issue. In the very worst case scenario, I don’t know how you do it other than extend money and the public takes the loss.”

    Fannie Mae and Freddie Mac have raised a combined $20 billion since December to cover losses of more than $11 billion generated since the credit crisis began last year. Freddie Mac has yet to raise a planned $5.5 billion, scheduled for mid-year.

    The companies have access to the Fed’s so-called Fedwire payments system allowing them to access funding if needed, said Vincent Reinhart, the Fed’s chief monetary-policy strategist from 2001 until September 2007.

    Pre-2006 Mortgages
    They can withstand the slump in part because most of their investments are mortgages made before 2006 when lending standards were tighter, making them less likely to default, said Eileen Fahey, a Chicago-based analyst at Fitch Ratings.

    “We do not believe they are technically insolvent,” Fahey said. “People seem to lose sight of the fact that a majority of the mortgages that they are holding and are guaranteeing were originated pre-2006.”
    Comments by the companies’ regulator this week that they are adequately capitalized also eased concern, said Lawrence Yun, chief economist of the National Association of Realtors in Washington. The companies have about $80 billion of regulatory capital supporting $5.2 trillion of mortgages.

    “Just given the size of the two companies, surely the government would not stand aside” and let them fail, Yun said.

    Record Yield
    Fannie Mae sold $3 billion of two-year notes yesterday to yield 74 basis points more than Treasuries. A basis point is 0.01 percentage point. That’s the widest spread since Fannie Mae first sold two-year notes in 2000 and triple what it paid in June 2006.
    The price of credit-default swaps, contracts used to speculate on the creditworthiness of Fannie Mae and Freddie Mac, doubled in the past two months to more than 80 basis points for the senior debt, according to London-based CMA Datavision.

    The median credit-default swap on debt rated Aaa by Moody’s was 26 as of basis points as of July 8, data from the credit rating firm’s strategy group show. It was 76 basis points for debt rated A2.
    Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

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