Saturday, February 04, 2012

Welfarism 15: Abolishing Pork Barrel

The main justification -- or alibi and excuse -- for the pork barrel by the President, legislators and even local government executives, is that these elected officials can directly identify projects that provide welfare to their people and political supporters.

In September 2004, Minimal Government Movement (we wanted to start a political free market movement, not just a free market think tank then) issued this statement ( 5 1/2 pages long) and distributed to our friends and network. This is a result of internal discussions and revisions among MG supporters then via the MG yahoogroups. Lots of ideas then that remain valid until today, and the next elections are just 15 months away.

Why Legislators' and the President’s Pork Barrel Should be Abolished

 The Role of Government.

The job of government is to improve the citizens' and taxpayers' well being, not the politicians and bureaucrats' well-being. Government should help its citizens with lower taxes and efficient and corruption-free services. Burdening its citizens with inefficient and corruption-tainted services should not be accepted nor tolerated.

Thus, government can help the citizens in two important ways: First, by optimizing the services that it delivers to the people, by making the citizens satisfied and not suspicious, happy and not hesitant and revolting, in paying their taxes. Second, by cutting the taxes that it collects from the citizens in exchange for reduction of corruption-tainted services that it delivers.

When there is widespread suspicion by citizens of the quality of services that they receive in return for the various taxes that is collected from them, government leaders, assuming they have the decency and intelligence to recognize this, should go for the second option.

The Role of Legislators.

Legislators are called as such because their main task is to legislate and  formulate laws. Laws that are designed to improve the quality of life – physical, mental, moral, cultural – of our people, without greatly restricting individual freedom.  It is not their duty to execute and implement local projects because that is the task of the Executive branch, both the national government agencies and the local government units (LGUs).

Their task is to discuss and debate how to cut expenditures when these are no longer supported by projected revenues for the year and the coming years. When such expenditures will encourage dole-out and subsidy-dependence and hence, will further bloat future expenditures,  maintenance of which can only mean more and higher taxes from the citizens whom they are supposed to serve. 

Legislators should stop unsustainable subsidies and borrowing spree by the President, the Finance Department, and losing government corporations. In particular, legislators should fiscalize the President on his/her nasty habit of assuming the debts and liabilities of losing government corporations, and passing them on as debt service burden of the national government that will be paid through more or higher taxes from the citizens. This horrible practice is one of the major reasons why the public debt has been ballooning, and as a consequence, interest payment has been swelling, risk premium of the country has been increasing, interest rates have remained high if not further increasing, which adversely affected entrepreneurship, investments and external balance of payments of the country.

For so long, this has not been the case. A vast majority of our national legislators (and in many respects even local ones) aspire for office because of the political and financial benefits that are available as booty when one is a member of the House of Congress or the Senate. The same logic applies to those running for President.

The Root of the Fiscal Crisis.

We are in this deep fiscal crisis, although not yet a debt default crisis, because of the fiscal irresponsibility of our politicians, of many (though not all) of our legislators and Presidents, past and present. Even when many tax collectors were diverting many collections into their pockets and their politician backers, politicians' spending spree continued.  Even when many taxpayers were unwilling to part with their hard-earned money because of perceived malfeasance in governance, politicians' unsustainable subsidy policies continued. Even when interest rates were going up because of the expanding public debt, politicians' penchant for endless borrowing continued.

One can alternatively look at pork barrel funds as MalacaƱang’s  way to “bribe” legislators to just rubberstamp the approval and appropriation of ever-larger interest payment, and divert their attention away from scrutinizing those debts by government financial institutions and corporations that have been assumed by the national government (NG). For instance, NG’s assumed debts from DBP liabilities from Marubeni-PASAR, MHI-PHILPHOS and BEE-PHILPHOS;  Napocor’s liabilities from US Eximbank, American Express and UBS; PNB’s liabilities from NIDC-Chase Manhattan and NIDC-Indo Suez. Legislators will be busy following up the release of funds for their pork barrel projects and will have less time to examine those assumed debts, the extravagance of some government agencies, corporations and financial institutions.

In a sense, the “diversionary” goal of pork barrel has succeeded because the already bloated “off-budget accounts” have been further padded by those indeterminate “assumed liabilities and net lending to corporations” (ALNLC) accounts. These 2 items have contributed P748.6 billion (37.3%) of the P2,009.4 billion new increase in national government debt over the last 7 years, 1997-2003 (see UPSE Professors’ paper, “The deepening crisis: the real score on deficits and the public debt”, August 2004). And some legislators can only file half-baked resolutions putting a cap on interest payment, but not initiate a serious examination of those accounts, much less to challenge and stop the President from continuing that awful habit of assuming those government corporations’ debts and passing them to taxpayers in general.

Abolishing “Pork Barrel”.

Thus, legislators should focus their time and energy on finding ways to prevent the slippage of the economy to a possible debt default crisis. This may require cutting the Executive branch’s excess fat and expenditures, limiting if not stopping the President’s power to indiscriminately assume debts of losing corporations. This may require raising power rates to control financial bleeding of Napocor, scrapping the Presidents’ and legislators’ pork barrel, and reducing the LGUs’ Internal Revenue Allotment (IRA) for at least two years.

Thus, legislators should not call the proposed cuts in their pork barrel as "sacrifice". It simply is the right thing to do.  We believe that it is about time our country’s political leaders, from legislators to the President, to show some semblance of decency by scrapping the pork barrel. If not outrightly, then a phase-out within 3 years. Pork barrel, intelligence funds, and discretionary funds are one and the same – they are not properly accounted for. And when expenditures are not properly accounted for, government has no business appropriating for such funds from our pockets, away from our families and personal needs.

But don’t pork barrel funds help handle all those requests for assistance in funerals, hospitalizations, weddings and fiestas, and other needs of the legislators constituents? And don’t legislators have the real desire to help so they can expect voters’ loyalty in the next elections? Finally, can the pork barrel be made more transparent as compromise, instead of being cut and ultimately abolished?

The "pork barrel to finance personal requests by constituents to buy their loyalty to get reelected to get more pork barrel to finance requests by constituents..." is a vicious cycle like the chicken-and-egg question.  If it is true that legislators can identify the needs of their constituencies better than those agencies of the Executive branch, then one option is to shrink those agencies by demoting them from line departments to bureau-level offices, just implementing the wishes of the legislators and the President. Taxpayers can save money with the abolition of many Secretaries, Undersecretaries, Assistant Secretaries, planning and related departments of those agencies, their travels, office rentals and supplies, etc.

To dispel thoughts that scrapping legislators’ pork will concentrate discretionary spending in the hands of the President, the Presidents’ pork should also be scrapped. The President therefore, cannot be accused of transferring the loot from Congress to MalacaƱang. Anyway, the President is getting some P1 billion/year from Pagcor, which is a substantial amount already.

Abolished pork barrel funds should  go to retiring some domestic debts. A P20 billion domestic debt retirement, at around 8% interest rates (91-day T-bills) would mean P1.6 billion annual savings in interest payment and hence, could go to social and economic services in the succeeding years. In addition, principal amortization in the succeeding years shall become less burdensome
Towards Greater Individual Freedom and Responsibility, Not Politicians’ Freedom to Raid our Pockets.

Individual freedom is greatly restricted when the state determines how much the individual can bring home from his monthly income. When the state further reduces his take-home pay with various forms of consumption taxes, from VAT to fuel tax to vehicle registration fees. When the state is promoting collectivism by coercion, not cooperation. 

The pork barrel politics is pulling the public, the citizens, to embrace the statist, forced collectivism, philosophy. Citizens can manage their personal and social finance better than politicians. Thus, the latter’s “privileges” of raiding the citizens’ pockets should be limited.

The real "sacrifice" that legislators can proudly boast to the citizens is when they will enact legislations giving relief to taxpayers, like cutting – if not abolishing -- income tax. A cut, if not abolition, of individual income tax is equivalent to a pay rise to all salaried and fixed income earners. Another "sacrifice" that legislators can give to taxpayers is when they abolish agencies and programs that distort economic efficiency and breed corruption in government, so that a shrank government will require small taxes to maintain without incurring perennial budget deficits.

Those moves are considered "sacrifices" because this will reverse the dole-out culture that has been ingrained in the minds of many Filipino voters. But this will help spare the same voters from the economic hardships that will fall upon them should the country end up defaulting paying its ever-expanding debts.

Scrapping legislators’ and the President’s “pork barrel” need not be done within 1 year. Another formula to adopt could be: they can keep 50% of their pork barrel in 2005, down to 25% in 2006, zero or total abolition in 2007.

Thus, the next batch of legislators in the 2007 elections should realize that they are there to legislate laws, to fiscalize the Executive branch, not secure booty for themselves through continued high taxes from the citizens. This way, booty-hunting politicians will be drastically reduced and well-meaning politicians will be encouraged to run as legislators.

Ultimately, the government should shrink – from line departments to government corporations to state universities and colleges (SUCs). A shrank or small government and bureaucracy will require small taxes from the public.

Minimal Government Movement
September 7, 2004 

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