* This is my article yesterday in interaksyon.com.
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MANILA - The government is setting aside P330-plus
billion a year in interest payment alone for our public debt, and many people
are not angry with that huge transfer of money from average taxpayers to rich
lenders. The people are angry (and rightly so) of the alleged P10 billion pork
barrel scam.
Let us compare the numbers and see why public anger is
disproportionate to the money that is siphoned off from their pockets.
At the heart of public anger and discontent over the
Napoles pork barrel scam is the huge lump-sum money allocated to legislators in
both the Senate and House every year. This is a separate item in the National
Expenditure Program (NEP) and beyond the amount allotted to various national
agencies, government owned or controlled corporations (GOCCs) and local
government units (LGUs).
Table 1. Priority Development Assistance Fund
(PDAF), in billion pesos
Source: DBM, NEP 2012 and 2014
Note the big jump of legislators’ pork barrel from the
Arroyo to the PNoy administrations, 2010 vs. 2011 PDAF fund.
The alleged P10 billion pork barrel fund that was coursed
through Janet Lim-Napoles (JLN) over many years does not seem to be itemized.
Below is an itemized table covering 2006-2011 but totaling only P3.13 billion.
Table 2. Amount dispensed to some legislators in the
Napoles pork barrel scam
Source: Philippine Daily Inquirer, August 30, 2013
The public is angry because almost none of this amount
went to clear projects that benefitted the poor, but were simply divided among
the legislators (they allegedly got 70 percent), JLN and bogus NGOs, and some
implementing agencies and COA auditors that allowed such irregular distribution
of funds without publicizing it. It was the internal whistleblowers who
divulged the scam and the legislators involved.
While the public fund siphoned to corrupt legislators and
the JLN camp was indeed big, the amount is loose change -- in short, barya --
compared to the amount of money that leaves the public coffers yearly just to
pay the interest on our public debt. Most people are not aware of the magnitude
of such payment: around P332 billion a year on average from 2012 to 2014:
P312.8 billion in 2012, P332.2 billion this year; and P352.6 billion next year.
Table 3. Principal and interest payment of Philippine
public debt, 2012-2014
Source: DBM, Budget of Expenditures and Sources of
Financing (BESF) 2014,Table
B.20
Interest payments in 2010 and 2011 were also huge, P294.2
billion and P321.6 billion, respectively. So annual interest payment is about
14 times the size of the annual lump-sum pork barrel of legislators, and 32
times the share of the Napoles camp.
Table 4. Principal and interest payment of Philippine
public debt, 2010-2011
Source: DBM, BESF 2012, Table
18
Another way of looking at it is that from 2010 to 2014,
for every P100 in various taxes that we pay -- personal income tax, corporate
income tax, excise tax and value-added tax (VAT) passed on to us consumers,
documentary stamp tax, import tax, travel tax, vehicle registration tax, etc.
-- about P23 of it is used to settle the interest alone on the country's debts.
And only P77 will be used for salaries, offices, subsidies and projects of
various government agencies -- local and national -- assuming that such
services and subsidies are indeed necessary or are efficiently provided at the
least cost possible.
Table 5. Interest payment as percent of tax revenues,
2010-2014
Sources: Interest payment, Tables 3 and 4 above; Tax
Revenues 2010-2012, DOF, Fiscal
Update Tax Revenues 2013-2014, DBM, BESF 2014, Table C.1
On top of various national taxes, there are regulatory
fees to pay like passport fee, airport terminal fee, driver’s license fee.
Further, there are various local government taxes and fees.
Some LGUs too have their own public debt and are also
paying high interest, but such liabilities are confined at the local levels and
are not passed on as part of the public debt of the national government.
The lump sum pork barrel fund of P25 billion per year --
even if we assume that all of it is lost to corruption -- comprises just 1.5
percent of total tax revenues.
Why have our annual interest payments risen to such high
levels? Department of Finance (DOF) projections place the outstanding
debt of the national government at P5.865 trillion by end-2013. The country’s population
is projected to be around 98.2 million by then, from 92.3 million as of May
2010 national census. This means that every Filipino -- men and women, young
and old, rich and poor -- has a per capita debt of about P59,700 by end-2013.
Is this a good Christmas gift by the government to the Filipino people?
Table 6. Outstanding debt of the national government
at end of period, in trillion pesos
Sources: (1) DBM, Budget of Expenditures and Sources
of Financing (BESF) 2014, Table D.3, (2) Bureau
of Treasury
There are some differences in the 2012 and 2013 data
under the Budget of Expenditures and Sources of Financing (BESF) and the Bureau
of Treasury (BTr). Some items in the former may have not been included in the
BTr data, but nonetheless, we are talking about nearly P6 trillion of public
debt by the end of this year.
Public debt is simply the accumulation of waste in
government -- from P1 billion a year to P10 billion a year and P300 billion a
year. If public spending in the past was generally productive -- say in public
education, health, roads and bridges, irrigation canals and agrarian reform --
then the people should be productive enough to pay back those debts after
sometime, and the debt stock should at least plateau, if not decline.
But this is not happening. Public spending for many
agencies and programs was designed to be forever, no timetable and thus are
inefficient, with the public debt stock rising around P350-400 billion a year
on average.
So even if public spending in the past was not stolen
outright, but was spent inefficiently, thus breeding more dependence and waste.
Fiscal irresponsibility has spanned all administrations.
The government has been living beyond its means almost every year for many
decades now. It is willing to get even high interest rate loans. While the
London Inter Bank Offered Rate (LIBOR) can range from only 0.5 to one percent
per year, the Philippine government is borrowing at a cost of up to six, eight
or 10 percent per year just to finance the annual budget deficit, defined as
the amount that expenditures exceed revenues.
Table 7. Big outstanding foreign debt securities of
the national government for budgetary support
Source: DBM, BESF 2014, Table D.6
In conclusion, here are the key takeaways:
1. The pork barrel scam is huge, the cause of the scam
must be stopped and government -- both Executive and Legislative -- must become
more transparent to the public.
2. But the public debt scam is much larger than the pork
scam, and many people are unaware of the magnitude of money flying out of their
pockets just to pay the annual interest payment.
3. We must not renege on debt payments, both principal
and interest. We should pay them. The enormity of the debt should be a constant
reminder to the any administration that endless borrowing is wrong.
4. A fiscally responsible government can have budget
deficit and borrow a lot in cases of emergencies -- like in the 1990-1991
earthquake and Pinatubo eruption, or the 1997 Asian financial turmoil. But when
there are no clear emergencies, the government should aspire to have a fiscal
surplus and pay back or retire some of those debts, and cut the
spend-borrow-spend policy.
5. Unfortunately, this is not happening, so taxpayers
must pressure the government to observe fiscal responsibility, to learn to live
within its means and not rely on endless borrowing.
Fat Free Econ 44: Deregulate Weather Forecasting, July 10, 2013
Fat-Free Econ 45: Newton's Laws of Motion and Traffic Congestion, August 11, 2013
Fat Free Econ 46: On Pork Barrel Aboition, August 25, 2013
Pork Barrel 6: Spontaneity and Friedrich Hayek, August 29, 2013
Pork Barrel 7: Presentation at Adamson University, September 04, 2013
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