Money for nothing and your checks for free


Over a decade ago, as I toured Vietville in Palawan (I was involved in the campaign to prevent the eviction of the Vietnamese refugees there), one of the nuns involved in running the place pointed out how the neat sawali houses of the residents had been built by the refugee-residents themselves. Various groups had only supplied plans and materials. “It means more when the people themselves build their homes, it inspires them to value their community and maintain it,” she said. Little did I know that I was seeing a prototype for the Gawad Kalinga of today.

The old saying goes, better to teach someone how to fish rather than hand them a fish; but then again this doesn’t mean that if someone is starving, you should then enroll them in a livelihood course. Feed them first. This means, though, that long-term plans have to be put in place, to prevent a culture of dependence from emerging. The increase in food and oil prices makes short-term relief an urgent matter to attend to; but long-term planning needs to take place, and we all depend on government to do that planning.

The Inquirer editorial today, Money for nothing, looks at the short-term priorities not just of our government, but regional governments, too. Interesting readings can be found here: Waterlogged Jakarta; Malaysia Faces a Succession Crisis (even as Malaysia may sell limited amount of subsidized fuel from next year) ; Truck drivers rally in Seoul over fuel costs; and US floods hit food prices (a little ray of light, at least for some, is Investors pour funds into Asian real estate).

The rise in food and oil prices has led to a debate that revolves around a lose-lose situation for governments: if they maintain subsidies, their bottom line suffers; if they abolish or decrease subsidies, the hold on power of governments may be imperiled. Something has to give, and it seems its the subsidies that are giving way, first. But not enough altogether, some think.

Take Dominic Lawson who says that while politically popular, oil subsidies actually benefit the wealthy the most:

Ban Ki-moon was not, needless to say, acting solely as an emissary for the United States: He was representing the teeming billions in nations as diverse as China, India and Malaysia. Yet if you look at this seizure in the oil market from the point of view of demand, rather than supply, then these same countries have also contributed directly to the problem they have asked Ban to sort out for them.

All have for years had a policy of subsidizing the price paid by their consumers and industry for oil products - and on a vast scale. According to the head of the International Energy Agency, Nobuo Tanaka, such subsidies are currently running at a rate of about $100 billion a year. In other words, these countries’ biggest energy consumers are being shielded from the effects of high oil prices, and therefore are not adjusting their consumption downward - quite the reverse, in fact. So we are seeing the subsidization of the richest in the Third World at the expense of all. This is not unusual: Indeed, it is absolutely standard in the upside-down world of market intervention. It is exactly the same as the global food market, in which subsidies ostensibly designed for the benefit of everyone are in fact disproportionately directed at the richest, paid for by national exchequers which supposedly represent the interests of nations as a whole.

So it’s not just that these poorer countries are building up their national debt to subsidize the use of oil; their economies will ultimately lose out in competitiveness to those in the West, where prices are liberalized. It won’t seem so at the moment to heavy users of fuel in the developed world, naturally: but in the long term, if oil prices stay at these levels, the countries which change the way they use energy will suffer less pain.

But even if you argue that the emerging conventional wisdom, is that government have to at the very least reexamine their subsidies and make them more focused, then at the very least, if our government’s embarked on a whole slew of subsidies, one has to ask if these are the right subsidies and for the right reasons -and with both short-term relief and long-term recovery in mind. In his column, Amando Doronila enumerates the subsidies:

Over the past three months, the Philippines, one of the developing countries threatened by political and social instability, has embarked on a program of subsidies that include: a P2-billion power subsidy program that offers a one-off P500 cash dole to four million families using less than 100 kilowatt-hours of electricity monthly to help cushion the impact of high electricity rates; a plan to offer a P2-per-liter discount on fuel purchases by public utility vehicle drivers in order to forestall a fresh round of fare increases; and a P300 per child subsidy for each family in addition to the P500 subsidy. These cash handouts come on top of the million-peso subsidy for cheap rice imported and stockpiled by the National Food Authority to enable it to sell rice at P18.25 a kilo, against the current price of P40 a kilo in the free market. A fertilizer subsidy is part of a P43.5-billion program aimed at dramatically increasing rice production in the short term.

These subsidies are to be taken from the 12-percent value-added tax, which the government claims is a bounty from one of its key fiscal reforms. The public coffers are claimed to be full because of this revenue.

Are our officials saying, as Doronila seems to suggest, that as far as government’s concerned, it can profit from misery, as was the case in April? Tony Lopez, in his column, argues that the President’s subsidies policy is on the right track:

Mrs. Arroyo, an economist, has deemed it better to give the cash direct to the poor. That way, the rich will continue paying taxes while the poor receive cash benefits.

The President is right. Direct the cash to the poor (who number 26 million). There may be questions as to how the poor will spend the money – pay for their electricity bill, buy more rice, buy clothes and slippers for their primary school kids, reload their cellphones, splurge on Jollibee at Mall of Asia, bet on the lotto or jueteng. To me, it doesn’t matter. The poor know best how to spend extra money. If you have never been poor, you don’t know just how far P500 will go.

Of course, some of the doleouts will be stolen. Graft, say 20 percent, I think, will be manageable. That’s small in terms of opportunity cost. Rice has tripled in price, a 200 percent increase in three months this year or 800 percent in one year. I think those in charge of the doleouts will minimize their greed and pocket just 10 percent.

(Over at Inquirer Current, you’ll find a link to a paper on the lessons learned from past food subsidies programs: the paper helps outline how to evaluate the pros and cons of a subsidy program and figure out how future programs can be improved.)

Lopez discusses Joey Salceda’s out-of-the-box solution:

The Noah’s Ark is a supplemental budget of P315.6 billion over three years (2008 to 2010). The amount could be P441 billion if you include subsidy for the National Food Authority’s rice procurement program (rice bought high and sold low to the poor).

The P315.6 billion includes in three-year totals, P84.6 billion in conditional cash transfers for the poor at the rate of P28.2 billion per year; P58 billion in agricultural production; P36 billion in scholarships; P24 billion in fuel subsidy for public transport.

At present, Salceda notes, most of Arroyo’s interim pro-poor programs have been funded by the VAT collection which could run out.

But will it be a case of trying to squeeze blood from a turnip? Lopez doesn’t say why Salceda thinks the VAT collection would run out, but my non-economist’s mind suggests to me that the reason’s simple: the VAT’s derived from consumption; when times are tough, consumption decreases, and when that happens, so does the VAT. No, you cannot squeeze blood from a turnip.

As it spends and spends, and scuttles some current sources of income (see Arroyo signs tax exemption law for minimum wage earners): according to Tax relief package favors middle class, says Monsod , Solita Monsod seems to be irritated that the tax relief’s being touted as actually helpful to the poor, when what it is is actually middle class relief) it needs to boost collections: Gov’t sets eyes on improving tax collection efficiency. Just as it rattles its saber to discourage profiteering: DTI to charge traders who go beyond 10% of suggested retail pric

To be sure, there are signs of government starting to think in terms of riding things out, medium-term (P4-B subsidies for poor included in budget — DBM), But there’s still some wiggle room. In a recent column, JB Baylon says he found out,

The 2008 budget has a bigger “allocation” for what is called “special purpose funds” than for the 34 line agencies of the national government: P562 billion for the former as compared to P503 billion for the latter…

…Using the 2004 budget, 1 percent went to the Judiciary, another 1 percent went to the Constitutional Commissions (COA, for example); 3 percent went to the Legislature inclusive of the much-maligned “pork barrel”; 27 percent went to debt servicing, and 68 percent went to the Executive department!

So now we know where the pork is.

From whom did he find these things out? You can start poking around this site: The Philippine Center for National Budget Legislation. This should prove to be an invaluable resource as the work begins for proposing and deliberating on, the 2009 General Appropriations Act (due to be submitted by the President in July when Congress reconvenes).

On the political front, Arroyo oversees Lakas-Kampi merger but Villafuerte, others not attending merger meeting of Lakas-Kampi.

And finally… Even as AlterNation101 suspected that it was all a public-relations stunt of the network, and Patricio Mangubat suspected that it’s all a public-relations stunt of the Philippine National Police chief, by 7 p.m. yesterday, ABS-CBN was already polishing its statement to mark the release of Ces Drilon and party from captivity, a moment RG Cruz happily recounts in his blog. Philippine Commentary reported he’d heard that the liberation of the captives was at hand, but mused,

I have no reason to doubt the veracity of this information (which will in any case be proven true or false in a few hours). If true, I would rejoice with the family, friends and associates of Ms. Drilon and company. But if it is also true that a ransom has been paid (as many will surely suspect) I would mourn for the next victims. It would also mean that despite perfervid declarations by both ABSCBN News management and the government authorities of a “no-ransom” policy, it will now be open season on other journalists and potential victims, with kidnappers and law enforcement fully in cahoots. I hope that whatever “story” will be given to explain events is not only credible, but true.

It’s important, I think, to point out it’s not just Ces Drilon who’s regained her freedom, there’s also this news: Lanao Bandits Free Hostages. I’m so very happy for Ces, and her fellow captives. But the story behind her abduction and who was really behind it, has only begun to unfold.

As smoke puts it, once the love-fest ends, it will be time for tough questions. As far as one of her assumptions goes, though, Philippine Politics 04 points out the policy of media embargoes has long been in place -and with official support.

Manuel L. Quezon III.

52 thoughts on “Money for nothing and your checks for free

  1. And yes, oh yes.. don’t forget Loren Legarda.. we should all thank Loren Legarda.. because Loren Legarda helped too.. that nice ol’ senator Loren Legarda.. (sarcasm of course)

  2. you know, while we await at least some news on what really happened, we ought to consider that if anyone one of us were held hostage, it shouldn’t matter who got us out of captivity or what their motivations were. to that extent hitting legarda’s foul, i think.

  3. if we check past hostage taking incidents in mindanao, legarda has been involved always in the negotiations and freeing the hostages. so, let’s give credit where credit is due. i heard ces drillon while in captivity has been frantically calling her and begging for her help specially when the deadline was set.

  4. But MLQ3, she has made her intentions to be our next prez known, and so while we await the news of what really happened, criticizing Sen Legarda is fair. Criticizing all contenders is fair, just to let them know people are watching them. Although she does have history with Ces Drilon, which might make this situation different. To be fair, she only surfaced after Ces Drilon was released.

    As for the subsidies, I wonder how those who earn just slightly over minimum wage feel about subsidizing the minimum wage earners. Im talking of course about the tax breaks.

  5. jeg, i don’t get it. if you think we should hit anyone who declares they want to be president, simply because they declared they want to be president, then what do you want? extend gloria so no one’s tempted to have ambitions for the presidency? if legarda didn’t get into the act until she could deliver, then she did the right thing -and it seems, if grd is correct, for some reason, she has experience in negotiating the release of hostages.

  6. I dont think we should, MLQ3, as if it is some sort of duty. Im saying if anyone wants to criticize them for whatever reason, they certainly can. It is not foul. Everyone of us should put these people under a microscope because we do not want another Gloria to slip in again.

    As for what I want, extending Gloria isnt one of them.

  7. Jeg, i think it’s a bit too late to stop another Gloria from slipping in again. Our aspiring presidential candidates have learned what they can get away with by observing how Gloria did it. As long as they can pacify the masa with subsidies, and as long as they can continue to keep the Oligarchs on their side, then our middle class microscope won’t matter. Similar to previous election seasons, as 2010 nears, the power of the middle class wanes while that of the Upper Class (because of their resources) and the Masa (because of their numbers) grows. The Middle Class had its window but it chose to move-on.

    On the subsidies, this was actually endorsed by Conservative [aka free market] economist Milton Friedman in the form of a ‘Negative Income Tax’.

  8. Let me note that Ina Reformina in one of her reports says that probably the kidnapping of Ces was more about the ARMM elections. I really don’t get the link. However, I am reminded that Mayor Isnaji was a former MNLF and a rogue one and it could be that he masterminded all of these things? Surely the PNP will know more about it than we will.

    What’s evident in this episode that there is a very serious breakdown of societal order in that area in the world and no amount of propaganda or braggadocio (pulbusin ang Abu Sayyaf) can solve that.

  9. I think we should make the subsidies permanent in the form of a negative income tax which every Filipino adult below a certain income level would receive as a monthly allowance. In exchange for this, as per the Wikipedia entry, the minimum wage can then be eliminated. To facilitate implementation, the recipients should then agree to being issued a National Id.

  10. Subsidies will further encourage the middle class to move out of the country, knowing that they will have to shoulder the brunt of the taxes to finance the dole-outs. The oligarchs, with all their tax perks as well as loopholes in the law, could escape ante-ing to this ‘pro-poor’ scheme. More so with permanent subsidies.

    Remember, as there are people who exploit squatters, there will be those who will exploit charity. Ang galing yata nating mga Pinoy.

  11. The P 500 one time subsidy for 4 millions families will be coming from the EVATS and intended to soften the High Energy Cost. But how far can this subsidy will go..The better subsidy coming from EVAT should have been a steady Refunds remitted to the low income families in a quarterly installment yearly upon filing a tax returns. this could easily done by centralizing and automating the Tax system with the use of Social Insurance Number for every Citizen upon Birth or becoming Taxpayer or naturalized citizens. This way rebates can be calculated according to the family income…Think Long Term…

  12. Not to burst your bubble but what would be so bad if the middle class moves out of the the country? That wouldn’t sound like much of a threat to those who are implementing the subsidies.

  13. Media people should get a GPS locator before going to Mindanao. As soon as the victims are release the US Air Force can drop a JDAM at that location. Goodbye kidnappers.

  14. Every society need the educated, ‘functioning capitalists’ (who actually manage enterprises) from the middle class. Otherwise, what will be left are the rentier-capitalists (who derive property rents and interest from financial assets)and labor. Even Marx acknowledged this.

    Now where will progress result from this situation?

  15. Vic,

    I agree that the Canadian government is the model for all forms of
    subsidies. They are very efficient at distributing them.

  16. We are asked to believe that no ransom was paid and that the release was effected by a combination of (1) the threat of military force by an AFP that will “never” pay ransom or negotiate with terrorists; (2) the offer of “livelihood projects by Isnaji Alvarez; and (3) the specially charming effects of honorary Muslim Princess, Loren Legarda on heavily armed mujahideen by talking to them by cell phone from Manila, (or scolding and cajoling them according to her).

    Allahu al Akhbar!
    (“Allah wears no clothes!”)

    One good thing will come out of this disaster though: Ces and the Press won’t soon be helping take over luxury Makati hotels and defending their actions as Press Freedom. There will be a greater appreciation for that old-fashioned rule that the Old Media has forgotten: Never become THE story.

    Besides there will be plenty of kidnappings, bombings, “military offensives” and “peace efforts” to report about in the next few months as a less militant, kinder and gentler form of journalism becomes better appreciated…the kind where the journalists are the extortionists and “hostage-takers” instead of the victims. No story is worth becoming a mosquito smorgasbord when “our brother Muslims” have shown a smarter, safer way way to fame and fortune.

  17. If subsidies are good, economy- wise, how come our economist president never applied it sooner?

    The fact that it is being only applied now when there is a looming economic crisis only shows that it is a remedy or blocking force but not a good economic policy.

  18. supremo, rebates for goods and services taxes for examples, all a taxpayer has to do is tick off if you are claiming the rebate or not in the tax returns(if not the rebates is forfeited to the Receiver General) then the “machine” will automatically compute the amount and every end of the quarter it’s in your account or in the mail and it could go as much as a $1000 for low income individuals and more for the families. And supplement for the Seniors for guaranteed minimum income also based on their Income Tax Returns…don’t how they do it, but it can be done.

  19. PSimeon, admittedly the educated middle class manager is arguably of some value to his/her Upper class masters. But for the latter, the threat of a loyal and useful servant leaving has to be weighed against the threat of 4 million hungry families many of whom are also voters.

    frombelow, they say that necessity is the mother of invention. i’m not sure whether it’s fear of social unrest or advanced buying of votes but whatever the Admin’s motivation, rebates going to the poor is good at many levels.

  20. mlq3, on your “money for nothing”, i see it as another damned if she does, damned if she doesn’t kind of thing. what’s wrong with spending her discretionary emergency funds to help the poor tide them over in dire situations that she did not cause (despite claims to the contrary by adversaries)?

    on ces drilon, i’m glad she’s safely back. any human life does not deserve to be ended in that manner. having said that, her self-confessed “tigas ng ulo” and selfish thoughtlessness deserve no accolade. but i think the most appalling is the gall of certain people to again politicize the sordid affair, particularly abs-cbn and loren legarda. it’s so predictable how these characters praise each other (with nauseating participation of drilon) and conspicuously take for granted the effort of the government in getting her back. drilon, who almost lost her head literally, profusely thanked everybody but “gloria”, the “pnp” or the the military. i doubt she would learn a lesson from all that she had been through.

  21. i like loren’s negotiations skills. ganda points. sure . i value the result of her effort . i am proud of her. i am a woman too.

  22. the rebate of 500 pesos is at least disclose to the public. the buying of votes for 1000 pesos is not acceptable. all politicians who are guilty of buying of votes must be disqualified from office immediately. we filipinos cannot be bribed. The poor take it because most of them think, the money is also their money. it is just given to them out of corruption. Rebates are good at many levels. I agree with CVG.

  23. any money that is given to the public especially to the poor will always go back to the government from taxation. it stimulates spending thus will help small businesses to re-assess their market in at least short period of time.
    any rich or middle class who have enjoyed higher salary can actually drain our money in circulation. spending excess cash outside our country , is the same thing as taking out savings.

    but we cannot limit and control what people do… awareness of spending our excess cash to boracay, el nido, mactan, bohol, siargao island will help small businesses and big corporations in business to pay our own filipino employees. Tourism advertising must be for our own good. this is another form of protectionism. protecting our money supply and spend it mostly within our country.
    HVRDS can probably help me explain this concept better or maybe KG.

    wondering why US dollar is low…when the dollar is low, it attracts foreign tourist, foreign investors thus will pour money to the US economy.

    in our situation, we must be aware of our own money system. a friend emailed me that 4 of my other friedns are visiting me from Philippines. I told them… it’s not a good time. go to boracay and elnido instead.

  24. For now thank God they are all safe!

    The vicious cycle will never end:

    look at the age of those second generation asgs:12,15 and so on.

    I may have commented that the best thing to do for now is ramsom which i will link below ;but taking a look at the ages and having followed the news rise of the asg when the brother of my close friend together with his men were mutilated in an ambush of the marines in 1993 sa basilan,wala pa sa mapa asg non pero sigurado ako same group ito.
    what do you do livelihood projects? all out war is not a solution either.
    what do you do tell them that all those mind conditioning and teachings to them since birth are all wrong?????????

    for those saying that the government create wars to justifyy its budget, BULLSHIT!!!!!


    pasintabi na I am glad the others were released from campaign funds of the local executive.
    If you check the sec, I can bet you will notice that on election years,company’s expenses get bloated,dahil ang mga kompanya di lang naman isang candidato ang biniigyan,I am talking only of presidential elections.ngayon tuloy I am thinking that campaign donations of conglomerates goes to local elections as well.

    This may be a viscious cycle alangan sabihin ko na itigil nyo na ang ransom para tumigil ang viscious cylce.

    why, did the death penalty stop the viscious cycle of the nature of the beast in man?”

  25. Leytenian, bakit ako ang pinantapat mo kay hvrds?Kwentong barbero lang ang maiiaalay ko sa iyo.

    our progressive taxation sucks,or is non existent!

    we were trying to pin one big fish on tax evasion,but because without him
    our airline industry would be a mess and doing business with him would be more productive. Is that so?

    Tax the rich more.

    the value added tax calculation of taxing only the markup or tubo or the value added is not happeening.pati businessmen binabawian tayo at tinitira tayo ng harapan.
    imagine by taxing 12 % on the everything.
    what’s the excuse of our lawmakers it is called it expanded value added tax.
    e pumunta ka sa doctor,furniture shop or any shop ano itatanong sa iyo, kailangan mo ba ng resibo?kasi kung me resibo additional 12 % anak ng pating oh.

    removing minimum wage earners from the tax base is for what?
    we have a large underground economy, yung mga umuutang sa mga microlender at five-six mga palengkera,mga tricycle drivers yan do they pay income taxes?pati inutangan nila di nila mabayaran eh.

    Yung turism buti na lang totoo yang multiplier effect nyan,mas long term at wider reach pa kesa multiplier effect of let’s say construction.

    pero i have something to bitch about:Koreans

    they have their own tour guides,own groceries,own hotels
    pano sila makaktulong sa economy natin.

    ang masasabi ko lang sa mga angal ko ,buti naman there are always exceptions to the rule..

  26. KG,

    “we were trying to pin one big fish on tax evasion,but because without him
    our airline industry would be a mess and doing business with him would be more productive. Is that so?”

    who is this man? let me ask.. how many people employed under his managment or under the name of his entity. if plenty, calculate the value of taxation revenue from all of his employees. we have to justify why we need to tax the rich. the rich cannot make money without human resources to move its services and products. unless this rich man is acting as an agent with no employment generated.. I can’t conclude that all rich men in our cuntry must be tax heavily. the SEC is formed to regulate all licenses. That’s what quarterly reporting is for . Adding to an ease to our overall business process, the ID system was a good proposa. I can easily manage the whole country even if I have to fire all the senators. hehehe

    “e pumunta ka sa doctor,furniture shop or any shop ano itatanong sa iyo, kailangan mo ba ng resibo?kasi kung me resibo additional 12 % anak ng pating oh”

    oh kaya pala… ang kapatid ko always ask for a receipt when he buys gas and any other sevices… noong nandiyan ako.
    my doctor friend who has 3 clinics in manila, always issue a receipt. she was not for money. she was for career and accomplishment. success lies on one’s honesty and best policy. karma is the other way.

    yung mga businesses na nagtatanong nang ganun, i report kaagad.. saan na man pala mag report? wala ba tayong hotline , like office to receive such tips for this kind of malpractice? our government must replace manny pacqaio’s face on our highways. it should create billboards for true and correct advertsing.

  27. national id:

    alam mo na siguro tulad dyan sa tate the ss number tells alot.
    dito ang hirap ng data sharing kahit intergaency like sec to bir, lto to bir
    boc to da to dti
    punta tayo boc dahil dati batang pier tayo comnputer operator who handles ifm or inward foreign manifests, has seen too much with my virgin eyes how things happen. you noitice why our import data to country of origin their export data to us does not match,because boc does not share with other departments other than the nso and this is prone to technical smuggling.

    we need interconnection of departments and e governance,sayang ang nbn could have partially solved it.ano naman ang gagawin natin pabayaan na lang na me sabit ,ewan ko ha ordinaryong mamayan lang ako kaya minsan parang gusto ko maniwala ke benign0 para lang me manyari use trust para me mas madaming sevices na mapapatupad.

    sa ngayon

  28. negative income tax:

    meron tayo nyan :TAX CREDIT SCAM

    While the notion has long been popular in some circles, its implementation has never been politically feasible. This is partly because of the very complex and entrenched nature of most countries’ current tax laws: they would have to be rewritten under any NIT system. However, some countries have seen the introduction of refundable (or non-wastable) tax credits which can be paid even when there is no tax liability to be offset, such as the Earned Income Tax Credit in the United States and working tax credit in the UK. Under President Richard Nixon, a NIT proposal almost made it though Congress. At first Friedman lobbied hard for it, but when the NIT proposal was going to be in addition to the current system, instead of in place of it, Friedman ended up fighting it.

  29. On neoliberalism: I was trying to relate to what HVRDS was saying.

    para maintindihan ko

    “Notable opponents to neoliberalism in theory or practice include economists Joseph Stiglitz, Amartya Sen, and Robert Pollin,[25] linguist Noam Chomsky,[26] geographer David Harvey,[27], sociologist Patrick Hunout, and the anti-globalization movement in general, including groups such as ATTAC. Critics of neoliberalism and its inequality-enhancing policies argue that not only is neoliberalism’s critique of socialism (as unfreedom) wrong, but neoliberalism cannot deliver the liberty that is supposed to be one of its strong points.[28] Daniel Brook’s “The Trap” (2007), Robert Frank’s “Falling Behind” (2007), Robert Chernomas and Ian Hudson’s “Social Murder” (2007), and Richard G. Wilkinson’s “The Impact of Inequality” (2005) catalogue why high inequality spurred by neoliberal policies produces profound political, social, economic, political, health, and environmental constraints and problems. The economists and policy analysts at the Canadian Centre for Policy Alternatives (CCPA) offer inequality-reducing social democratic policy alternatives to neoliberal policies. In addition, a significant opposition to neoliberalism has grown in Latin America, a region that has been a target of neoliberal policies. Prominent Latin American opponents include the Zapatista Army of National Liberation rebellion, and the governments of Venezuela, Bolivia and Cuba.

    Critics of neoliberalism view neoliberalism as both an economic and political project aimed at reconfiguring class relations in societies. Many core countries’ middle class and labor aristocracy families have become constrained by the cascading costs of conspicuous consumption goods and services, finding themselves losing radical amounts of time once free for personal development, recreation, family, community, and citizenship. Moreover, workers have been so heavily disciplined by capital and the capitalist state that, as Alan Greenspan said, they are “traumatized” and unable to politically moderate capitalist aggression. [29] Daniel Brook’s “The Trap: Selling Out to Stay Afloat in Winner-Take-All America” (2007) describes the anti-democratic effect of decreased middle class welfare.[30] The massive U.S. military-industrial complex adds an extra layer of repression to working class “traumatization,” according to David Harvey (2005), making resistance and inequality-reducing policy innovation seem unfeasible to most workers. A “traumatized” working class allows the capitalist class absolute reign, which Harvey claims – citing the economic crises of 1873 and the 1920s – to be disastrous for economies around the globe, states, and working class people; though, he points out, on average capitalists were not negatively impacted by these crises.[31]

    Critics of neoliberalism sometimes refer to it as the “American Model,” which they find promotes low wages and high inequality.[32] According to the economists Howell and Diallo (2007), neoliberal policies have contributed to a U.S. economy in which 30% of workers earn “low wages” (less than two-thirds the median wage for full-time workers), and 35% of the labor force is “underemployed”; only 40% of the working age population in the U.S. is considered adequately employed. The Center for Economic Policy Research’s (CEPR) Dean Baker (2006) has shown that the driving force behind rising inequality in the United States has been a series of deliberate, neoliberal policy choices including anti-inflationary bias, anti-unionism, and profiteering in the health industry.[33] However, countries have applied neoliberal policies at varying levels of intensity; for example, the OECD has calculated that only 6% of Swedish workers are beset with low wages.[34] John Schmitt and Ben Zipperer (2006) of the CEPR have analyzed the effects of intensive Anglo-American neoliberal policies in comparison to continental European neoliberalism, concluding “The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the view that U.S.-style labor-market flexibility dramatically improves labor-market outcomes. Despite popular prejudices to the contrary, the U.S. economy consistently affords a lower level of economic mobility” than all the continental European countries for which data is available.[35]”

  30. of course, i trust the plea of our people. it’s business process and management strategies remains to be not so efficient. malapit na KG. the way we converse on this blog and other blogs. the government cannot stop the maturity of our people… patience and our being pro-active is one key.
    i don’t believe on benigno’s advocacy that our people are vacuous.. vacuous is very negative to the minds of our children and to the youth. they must be provided hope to motivate them not to quit nor blame our government. i’m not worried with us who are mature enough to understand what benigno is trying to say. the youth must be nurtured not bullied.
    vacuous should be targeted to a specific leader who mismanage. kung sa bisaya” talinghaga” kung sa tagalog ” nagpaparinig” if he is concerned about libel.
    sorry.. trust? how can i trust benigno’s trust if his strategy of blogging don’t have a clear market. this is the internet. college students are here.
    it’s not good to put words to young people’s mouth. it’s not morally responsible.

    to benigs:
    sorry benigs… i have my opinion.. i tend to protect the youth who are still innocents. for they are the Hope of our Nation. i hope you will not take this personally. let’s be adults.

  31. On the subsidies, this was actually endorsed by Conservative [aka free market] economist Milton Friedman in the form of a ‘Negative Income Tax’.

    IIRC, that was coupled with a flat taxation system. We have a progressive tax system. Hence my question on how the people in the bracket just above them feel about it. I assume theyre not pleased.

  32. Jeg, you’re right i think such proposals should be treated as a package. That’s the reason why, as i said above, i think the negative income tax should be coupled with removal of the minimum wage (and a National ID system). The minimum wage caters only to the employed but our bigger problem is with the unemployed.

    As to those in the higher income tax brackets being ‘not pleased’, which do you think is more important, preventing families from going hungry or taking care of a minority’s reverse crab mentality? I can’t believe how self-centered some people could be.

    Anyway, i do think our income tax rates are too high. Here in Singapore, the rates are from 8% to 15% depending on Income Bracket. A higher percentage goes to the ‘CPF’ retirement fund (similar to our SSS). I think that’s a better model.

  33. individuals, corporation and any other form of entity who are tax heavily are not incentives for growth. it is hindering businesses to grow. disposable income from taxing a little less are money that can be poured back to the circulation. people will always buy something.
    for corporation to grow and employ more, the government should allow to defer their tax payment as long as continued growth for employment is obvious. it’s the same concept as corporation borrowing money from the bank at 8% ( for example), government can lend them money by deferring its tax due with interest rates . this is another form of investment. the government makes money from interest rates plus employment generated from corporate growth.
    easy said than done… policy must be implemented after careful study.

  34. As to those in the higher income tax brackets being ‘not pleased’, which do you think is more important, preventing families from going hungry or taking care of a minority’s reverse crab mentality?

    My question has to do with those in the tax bracket immediately above them. Those earning slightly more than minimum wage I gather have families going hungry as well. If minimum wage is X, and someone earns, say, X plus a couple more pesos, and he doesnt get a tax break… Should he be pleased? His kids are just as hungry as his minimum wage neighbor with the tax break. That’s why a flat tax with negative tax makes more sense.

    Youre right about unemployment and minimum wage. If unemployment is a bigger problem, the minimum wage should go. The government shouldnt prevent the unemployed from being hired. Once we tackle the unemployment problem, wages can increase because production will increase.

  35. more on taxation and money for nothing?
    i would agree for lower taxes..
    lower taxes for small businesses and individuals improve our economy. When small businesses have tax incentives to reinvest in their companies then that is what they do. When a small business invests in their company they buy more equipment and they need to hire more people to run that equipment. Also people need to be hired to make that equipment at another company and that is how it works.

    disposable income from lowering taxes is an incentives for any individual to start a small business.

    We all know the government is very inefficient and businesses are very efficient; businesses have to be efficient or they can’t make money. Government is only good at one thing; wasting money. In fact the government does that quite well. Do we really want to give them more money to waste?

    Trade fact: It is true that small businesses in the United States of America employ 75% of all its people . In fact, if it weren’t for the small businesses in America the United States would not have much of an economy at all. Small businesses are the backbone of the United States economy and its the engine for growth.


  36. Once we tackle the unemployment problem, wages can increase because production will increase.

    I meant “Once we tackle the unemployment problem, wages can increase when production increases.” Sorry.

  37. i would agree for lower taxes..

    That means reducing the size of the government or eliminating corruption. Which is more doable?

  38. As far as efficient use of limited resources is concerned, subsidies is bad economic choice.

    Now, if it has to happen as a necessary evil political option), then fund the subsidies from the earnings of the casinos, confiscated smuggled goods, “donations” from crony-oligarchs, etc.

  39. Jeg, i see what you mean, i.e. the 2 Dollar a day earners complaining against the subsidy received by the who earn 1 dollar a day. Using the mechanism described in wikipedia, where the subsidy is an automatic tax deduction to every income earner, i don’t think that concern would hold.

    Roughly, i think we should start with a half a dollar a day equivalent subsidy to every Filipino of majority age (18 years old) coupled with a flat 15% income tax rate (income should be computed both in cash and kind to minimize tax shields). The deductions to income because of tax would kick in at around 3.30 USD (equivalent) per day. Below that income level, the subsidy will be a net addition to income.

    Leytenian, businesses are more efficient than government as long as the industry they operate in is not susceptible to market failure, and as we can see with the dominance of Microsoft, even the IT industry is not immune from Market failure. A dominant company (or companies) in such a market can turn into a bureaucracy just like government (minus the corresponding accountability mechanisms). Why, for example, do people suspect that a water-powered car has already been invented but is hidden in the vault of an Oil company?

    Also, businessesmen as individuals on their own, create a new industry without government’s participation. For example, this Internet that allows us to go online was a creation of the US Department of Defense. The World Wide Web which makes blogs possible was also a creation of an employee of CERN, which is funded by governments.

  40. Speaking of h20 powered cars:watched the movie the formula?,water as replacement to oil?

    going back to the cars.

    June 14, 2008
    Water Powered Car Makes Splash In Japan
    Japanese company Genepax presents its car that runs on water, Reuters reports. The car has an energy generator that extracts hydrogen from water that is poured into the car’s tank. The generator then releases electrons that produce electric power to run the car.

    what will daniel dingel say:

    “Maker of water-powered car still fighting after 30 years
    by Joey G. Alarilla

    11-03-05 1969 was a landmark year for a number of reasons, including the conquest of space and cyberspace. Even as that year saw Neil Armstrong and Buzz Aldrin walking on the moon, so was the Internet born when its earliest incarnation, the United States Defence Department’s Arpanet (Advanced Research Project Agency network), went online.
    In the Philippines, 1969 was also the year that a Filipino inventor claims to have started tinkering with a revolutionary concept for the automotive industry. His idea: To power cars using hydrogen derived from ordinary water.

    Today, 30 years later, inventor Daniel Dingel is driving around in the only water-powered car in the world, still complaining that Filipino government officials and scientists refuse to support his invention.
    “They keep saying that the government is pro-poor, but what they do is sell off the resources and wealth of the Philippines. The government should really support the development of technology that would help thecountry pay its huge foreign debt,” he said. “

  41. leytenian,

    something about retail ;something related to small businesses as drivers to economy.

    Ms. Asia´s Waterloo

    Throughout Southeast Asia, reaction is setting in to the policies of globalization and liberalization promoted by multilateral agencies such as the World Trade Organization (WTO) and the International Monetary Fund (IMF). In Indonesia, small merchants are pushing the government to oppose further liberalization as big foreign marketing giants like French-owned Carrefour have, in a few short years, achieved an overwhelming position in retail trade.

    In Thailand, small retailers threw their support behind Prime Minister Thaksin Shinawatraís Thai Rak Thai (“Thais Helping Thais”) Party during the recent elections. They hope the new government would take up the cudgels for them in their battle against Carrefour, Makro, Tesco, and other giants that are now said to control over 50 percent of retail trade.

    In the Philippines, the Philippine Congress denationalized retail trade last year, under pressure from the now-ousted Estrada administration. It is likely that, despite some safeguards in the Retail Trade Liberalization Law, the country is poised to repeat the experience of Thailand and Indonesia.

    This would be tragic since retail is a great absorber of labor. As analyst Rolando Hiro Vaswani points out, with its low barriers to entry, the retail trade sector employs some 11 percent of the work force, or over three million people.

    “Even the World Bank has warned that the retail trade sector is the economyís safety net,” says Vaswani. “It absorbs rural people being displaced from agriculture and urban workers being displaced by industrial downturns. It is the national shock absorber. You open it up to foreign participation and you will likely see a rise in open unemployment, with all the implications for social stability.

    good news

    no walmarts yet
    jc penney went bust and sm is in china!

  42. “Mrs. Arroyo, an economist, has deemed it better to give the cash direct to the poor. That way, the rich will continue paying taxes while the poor receive cash benefits.”

    Even Tony Lopez of Manila Times underscored that 20% of the doleouts to the poor will be stolen. Walang sinasanto.

    Tongpats business as usual. Psst….20%.

  43. “The 2008 budget has a bigger “allocation” for what is called “special purpose funds” than for the 34 line agencies of the national government: P562 billion for the former as compared to P503 billion for the latter…”

    Per JB Baylon of Malaya, 68% went to Executive Dept or at least P382 billion. P15 billion subsidy to the poor is less than 4% of Palace pork barrel for 2008. It is a win-win situation. The poor will feel gratitude to the Palace for something they have been paying all these years (as income tax to support the Arroyos pork barrel in addition to the 12% VAT). It is a good political mileage to calm down destabilization. Others get 20% even during difficult times – an opportunity hard to come by.

  44. The logic of dole-outs is simply to avoid riots. It is a political solution to an economic problem. Dole-out relief is meant to convince the masses that the economic crunch is not caused by structural or governmental undoing. The economic crisis is an inevitable fate of a third world country bereft of food and oil resources. Dole-out relief is meant to mask the scarcity of management foresight.

    The danger of dole-out relief happens when the masses have become dependent on it and there is nothing left to dole-out. For thereafter, rioting, which dole-outs intended to avoid, becomes a serious threat again. And thereafter, the logic of dole-outs will be judged as bad logic to begin with.

    Ultimately, the logic of dole-outs is about buying time, time between the threat of the first riot and the second, and hope, that during that period somebody comes up with a logic better than dole-outs.

    How about the logic of resignation?

  45. CBJ,
    “Leytenian, businesses are more efficient than government as long as the industry they operate in is not susceptible to market failure, and as we can see with the dominance of Microsoft, even the IT industry is not immune from Market failure”

    i think we have discussed this already…
    “The government will enhance and promote an independent agency to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy.

  46. Marvin on, “The economic crisis is an inevitable fate of a third world country bereft of food and oil resources.”

    Not a third world country like Thailand on food. Philippines was rice exporter in 70s and ahead of Thailand in any scale then. But no thanks to its corrupt leaders, they always screw up everybody big time giving truth to a Philippines run by Filipinos like hell.

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