Tuesday, June 25, 2019

BWorld 342, Rising welfarism, rising taxes

* My article today in BusinessWorld.

Among the factors given why President Duterte’s Senatorial bets won and shut out the opposition in the May 2019 Senatorial elections were: a. high popularity of the President; b. high visibility of his build-build-build programs; c. reduction in inflation in 2019; and, d. failure of the opposition to convince voters that they are the “right group to lead the charge.”

These were contained in the articles written by fellow columnists in BusinessWorld, particularly:

1. “Understanding President Duterte’s approval ratings” by Andrew J. Masigan (June 04).

2. “Why the opposition lost in the 2019 Midterm (Senatorial) Elections” by Diana J. Mendoza (June 11).

3. “Why President Duterte’s senate bets won” by Calixto V. Chikiamco (June 17).

4. “Vox populi” by Romeo L. Bernardo (June 24).
I think what was missing among those analyses is that the Duterte administration has expanded welfarism and endless subsidies to the public regardless of their impact on the budget deficit, public borrowings, and need for more taxes. In short, Duterte has bribed the voters with more freebies on top of existing ones to get more votes.

Consider what the administration has expanded so far:

1. Free tuition in all state universities and colleges (SUCs), RA 10931 (Aug. 3, 2017)

2. Free irrigation law, RA 10969 (Feb. 2, 2018)

3. Free feeding program, RA 11037 (June 20, 2018)

4. Expanded/free nutrition program, RA 11148 (Nov. 29, 2018)

5. Free/expanded PhilHealth, RA 11223 (Feb. 20, 2019)

6. Free/expanded PhilHealth for persons with disabilities (PWDs), RA 11228 (Feb. 22, 2019)

7. Magna Carta for the Poor (more freebies and mandates), RA 11291 (April 12, 2019)

8. Institutionalizing 4Ps (expanded CCT), RA 11310 (April 17, 2019)

9. Sagip-Saka law (more freebies to farmers), RA 11321 (April 17, 2019).

Freebies are not really free — they are costly to the rest of the taxpayers. The numbers would show that compared to previous two administrations, the rise in public debt stock was very high under the current administration, average of P588 billion/year vs. P223 billion/year under the Aquino, and P265 billion/year under the Arroyo administrations. (See Table 1.)

The Philippines’ public debt/GDP ratio has been steadily declining, from 74% in 2004, 55% in 2009, to only 42% in 2016. Then the Duterte administration came and the decline has stopped and steadied at 42%. (See Table 2)

More welfarism, subsidies, and freebies with no timetable means more waste and social inefficiencies. Even the non-poor (like many college students in SUCs like the University of the Philippines) were considered poor and hence, became entitled to more freebies.

We need less welfarism and freebies. We instead need to cut taxes and regulations, encourage more entrepreneurship and job generation by the private sector. Then state dependence will decline and more self-reliant citizens will flourish.

See also:  

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