10 September 2009
Debt & Public Finance
– The Freedom from Debt Coalition today hit the budget system, from crafting to implementation, under the administration of Mrs. Gloria Macapagal Arroyo, describing it as “a legacy of deficits” and “a deficit of meaningful legacies.”
The proposed P1.54-trillion national government budget, described by the administration as Mrs. Arroyo’s “legacy” and final budget, is “nothing but a reflection of her nine-year practice of fiscal dictatorship.”
FDC explained that among Mrs. Arroyo’s “legacy of deficits” in relation to the NG Budget and its processes are marked by: democratic deficit; social spending deficit; and, fiscal deficit. Democratic deficit
Rebecca Malay, FDC vice president, said that under democratic deficit, Mrs. Arroyo has been practising impoundment or the refusal to allocate funds to certain programs and projects already appropriated by Congress and the unilateral realignment of funds or ‘savings’ to cover deficits of other items in the budget.
“When these two powers are combined, it is tantamount to the power to realign appropriations itself—a power which was widely perceived solely exercised by Congress,” explained Malay.
Also under democratic deficit are Mrs. Arroyo’s practices of line veto and reenacting the budget.
“Mrs. Arroyo’s penchant to reenact the budget for the first quarter of the year by imposing her line veto power on the effectivity date of the general appropriations act and its corresponding alteration has given her government more money beyond what is provided by the annual government budget, said Malay, stressing that Mrs. Arroyo’s “abuse of the line veto power” was repeatedly practised in the 2005, 2007, 2008 and 2009 budgets.
“This is on top of the power to reenact the entire budget, which was done in the 2002, 2004 and 2006 budgets,” said Malay, adding that in such a scenario, the government can realign funds without congressional approval.
“More so, a reenacted budget during an election period gives the incumbent undue advantage over the use of large sums of money which can be used for election campaign. This is the lesson of the fertilizer fund scam which occurred during the period the government was working on a reenacted budget,” Malay explained.Social spending deficit
But the worse is far from over, the debt watchdog said.
“The gaping democratic deficit in the budget system eventually led to a social spending deficit, the hallmark of Mrs. Arroyo’s budgets,” said Malay.
FDC, using a United Nations’ yardstick to evaluate education spending vis-à-vis total national income (6% of GNP), said that the Philippine government from the time of Mrs. Corazon Aquino to Mrs. Arroyo, has failed to allocate P1.66 trillion more to education. Of this amount, P1.3 trillion is the current administration’s deficit. Education spending as percentage of the GNP dipped from Mr. Joseph Estrada’s 3.8% (1998) to a low of 2.26% in 2007 under Mrs. Arroyo. This constitutes what former FDC President Maitet Diokno Pascual calls the “social debt,” the historical obligation owed by the state to its people.Fiscal deficit
FDC said that the Arroyo government is known for its deficit spending, meaning the government is spending more than its earnings. The group stressed, however, that “we are in a deficit not because we are spending more on social services, not because there is fiscal expansion, but because we are dutifully servicing our debts, many of which are challenged as illegitimate.”
From January to April 2009 alone, 26.3% or P122.2 billion of government’s disbursement just went to interest payments for debts, which clearly highlight the already obvious—the government’s spending compression is due to the fiscal drain of too much debt servicing.
“We cannot spend appropriately because we are obstructed by unbendable fiscal policies such as the automatic appropriations on debt payments. This was the case of the 2004 fiscal crisis; and, this is still the case in today’s renewed ballooning of the budget deficit,” said Malay.
“Sadly, with chronic budget deficit, the government’s inefficient revenue collection and Mrs. Arroyo’s spending spree on lavish dinners and extravagant overseas trips, deficit spending – which should have augmented government expenditures in order to stimulate the domestic economy at the very least, is stimulating something else—corruption, lethargic revenue generation and debt accumulation,” lamented Malay. Deficit of legacy
FDC asserted that unless the budget process is democratized and provided with the necessary reforms to eliminate its deficiencies, any talk of legacy in the budget will always be hot air.
“In reality, what we have is a deficit of a real and inspiring legacy in the budget. Mrs. Arroyo, instead of using her long period in office to resolve the budget system’s fundamental problems, has in fact become a chief hurdle in the realization of that goal,” the group said. -30-