Government and Taxes: PDAF

Showing posts with label PDAF. Show all posts

Wednesday, April 09, 2014

Pork Barrel 9: Are PH Government Institutions Ready for Cleansing?

A friend, Vince Lazatin, convenor of the Transparency and Accountability Network (TAN), posted some provocative questions in his fb wall yesterday. Vince asked,

Are our government institutions ready to handle the PDAF cases against some of the country's most powerful personalities? Are our government lawyers up to the task of facing the most expensive defense attorneys that money can buy? Will the chips be allowed to fall where they may?

These PDAF cases will put everyone to the test, including non-government actors such as the media, the citizens, and NGOs/CSOs. There will be people who will rise as beacons of hope, while others will spiral into a vortex of infamy.

People, are we ready to see this to the very end? Or will we recede into the anonymity of our daily lives and concede the future of this country to apathy and indifference? Our future rests squarely in what we are willing to accept and what we are willing to fight for.

In short, are Philippine government institutions and the public ready for social and political cleansing? Good and direct question, but I doubt if people are ready to hear the likely answers to those questions.

Are our government institutions ready to handle the PDAF cases against some of the country's most powerful personalities?
NO.

Are our government lawyers up to the task of facing the most expensive defense attorneys that money can buy?
NO.

Will the chips be allowed to fall where they may?
NO.

People, are we ready to see this to the very end?

NO.

All stealing by some (or many) legislators will not be possible without the participation of all Executive agencies where the money is supposed to be spent. Also with participation by some (or many) COA auditors as this crime has been happening not just a few years ago, but several decades ago.

Many in the public themselves -- NGOs, CSOs, people's organizations (POs), media, consultants -- are indirect beneficiaries of this crime. Some or many of them were the conduits, or the "I see nothing wrong in exchange for money", of this large-scale money laundering and plunder.

I suggested a campaign for a back to P2 trillion budget. It’s nearly P2.3 trillion this year, and likely to reach P2.6 trillion next year. There is no reason to keep the budget rising by around P300 billion a year and borrowing the same amount yearly, while the public debt stock keep rising by P400-450 billion a year, even if many of this money is wasted, if not outrightly stolen.
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Wednesday, October 02, 2013

Pork Barrel 8: Forum at DLSU Manila

More than corruption in pork barrel use, government has corrupted the people's value that personal and parental responsibility can be secondary to more government responsibility.

I said that during a forum at De La Salle University (DLSU) Manila last Friday, September 27, 2013, "Double Dead: A Forum on PDAF", in front of about 200 students. The event was organized by two student organizations, the Pol. Science Society plus an organization of Development Studies majors.

I was one of three speakers that day. The other two were Atty. Eduard Chico of DLSU College of Law, and another lady lawyer from DLSU College of Business Administration. We seemed to corroborate each other's point, very spontaneous.

The format was also based on spontaneous discussion. No powerpoint, the faculty moderator, Prof. Gina Lomotan of the DLSU Political Science Department, read the guide questions, then three minutes talk from each speaker, then Q&A round 1, Then student moderators read a question and asked the audience response/answer of Yes or No, asks some of them to explain their answer. Then Q&A round 2, and so on. All done in 1 1/2 hour.

The main questions addressed to me were, "Why is PDAF a governance issue, how has it affected governance in the country, should it be abolished or reformed?".

My opening arguments to answer these questions were as follows.

1. Pork barrel is a bribe by the Executive branch for its wasteful if not corrupt spending. An equally wasteful and corrupt Legislative branch has allowed this, via pork barrel fund. If the Legislature is truly independent, it should have checked and controlled the Executive's wastefulness, but it did not do its job.

2. One clear proof of the Executive branch's wastefulness is the ever-rising public debt. Even in the absence of clear national emergencies (1990-91 earthquake + Pinatubo eruption, 1997-98 Asian financial crisis were clear emergencies and debt financing and borrowing were clearly justified), the Executive kept borrowing, endlessly and irresponsibly, to finance its wasteful and often bloated spending. Even if domestic revenues are not enough, government keeps spending beyond its means. The public debt stock is rising by around P350-400 B a year.

3. The Priority Development Assistance Fund (PDAF) or other Philippine legislators pork barrel can never be abolished because it is a bribe by the Executive branch to the Legislative so that the wastes and irresponsible spending by the former will be tolerated without much questions.

My other points during the open forum were:

4. In periods or years where there are no clear national emergencies, the government should aspire to have budget surplus, pay back some old debt. This never happened and is far from happening, regardless of the administration in power. More public debt means more and rising interest payment, average of P332 B a year from 2012-2014. The public is not scandalized by this huge transfer of money from their pockets -- such interest payment alone constitutes about P20 or 1/5 of every P100 in various taxes that we pay.

5. Since the audience were mostly Political Science and Development Studies majors, I briefly discussed political theory, "What is the role of government?" From the 3 Social Contract theoreticians, Thomas Hobbes, John Locke and Jean Jacques Rousseau, and corroborated by another classical thinker, Adam Smith, the main role of government is to protect the citizens from aggression, protect their right to life against murderers and aggressors, their right to private property against thieves and destroyers of property, their right to liberty against bullies. The classical thinkers hardly or never advised that government should provide numerous, endless, forever redistribution and welfarism. Such endless welfarism has become the basis of endless expansion of government including pork barrel expansion.

Fat Free Econ 47: Pork Scam vs. Public Debt Scam

* 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

Pork Barrel 6: Spontaneity and Friedrich Hayek

* This is my article last Monday in thelobbyist.biz.
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After the Priority Development Assistance Fund (PDAF0 has been abolished by the President last Friday, August 13, 2013, there is an unprogrammed amount of P25.4 billion in the proposed 2014 budget. If explicit pork barrel is indeed abolished, the budget should be lower by that amount. But this is not the case.

According to DBM Secretary Butch Abad, legislators can introduce their priority projects, subject to certain guidelines as mentioned by the President last Friday, into the budget. Meaning those projects will be inserted into agency budgets and the size of the proposed budget has remained the same, not declined. This practice is often called as “Congressional Insertion.”

The budget submitted by DBM to Congress after the President’s State of the Nation Address (SONA) is a compilation of financial requests from four groups: (a) provincial and regional offices of an agency like DA, DILG, DTI, etc., (b) Central offices of those agencies and Departments, (c) local government units (LGUs), and (d) NGOs, people’s organizations via “participative budget consultations" like the recent Bottom up Budgeting (BuB) scheme.

Once the budget is discussed and heard in Congress, legislators can disapprove some proposals and projects, say projects coming from Mayors, Governors and NGOs who are not friendly or non-ally of the legislators. Then they can increase the budget of certain projects which can benefit their friends and allies, like in municipalities and cities that supported them in the last election. It is the prerogative of the legislators to do this because they are empowered by the Constitution to scrutinize and pass a budget law every year.

This Congressional Insertion is one form of soft or implicit pork barrel. Thus, pork barrel can never be truly be abolished, without expecting the national government to shrink in size and budget. Only a truly independent and activist legislature can control and disallow wasteful or excessive spending by the Executive branch.

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The citizens’ “Million March” in Luneta on August 26 is unique because it is largely spontaneous. While Edsa 1 revolution in 1986 was also spontaneous, big politicians and political groups later set the tone and direction of the protest movement. Besides, it was directed against a particular leader, the former President Marcos.

The “Million March” is different. It is not directed against a particular leader, say President Noynoy Aquino, but against corruption in general and corrupt officials in government, especially among the legislators implicated in the Napoles pork scandal. And there are no grand speakers with grand speeches and promises, no plackards and streamers, no dominant political color or political group organizing it.

The spontaneity and lack of central organizers with central planning thinking makes the “Million March” exciting and unpredictable. The activist public have become wary of the usual protest leaders and groups. They suspect that these groups are no different from the politicians that they criticize. So the public is now opting and experimenting the politics of spontaneity.

Big politicians, big political groups and big government do not like this kind of arrangement. They are used to dealing with centralized action so they can focus their politics of compromises, and bribery if necessary, on the leaders of those movements.

Famous Austrian economist and political philosopher, Friedrich Hayek, extolled the value of spontaneity in his book, The Constitution of Liberty (published 1962). He wrote,

Liberty is essential in order to leave room for the unforeseeable and unpredictable. Because every individual knows so little that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it….

Freedom means the renunciation of direct control of individual efforts that a free society can make use of so much more knowledge than the mind of the wisest ruler could comprehend… Freedom granted only when it is known beforehand that its effects will be beneficial is not freedom. Freedom means that many things will be done which we do not like. Our faith in freedom rests on the belief that it will, on balance, release more forces for the good than for the bad.

Hayek was referring to the evil of central planning in running societies and governments. Leave the individuals to run their own lives, their own households and communities, so long as the government is there to implement the rule of law – few, general laws and prohibitions that apply to all, no one is exempted and no one can grant an exemption. Like the laws against murder, stealing, abduction, land grabbing, extortion, destruction of properties.

The politics of central planning as practiced by many governments around the world, armed with huge annual budget as authorized by their legislators and the legislators getting their own pork in exchange for passing such budget laws, works against individual freedom and facilitates corruption. Corruption not only in wasteful or stolen spending, but corruption of values of the people, that they can relegate certain personal and parental responsibility in running their own households, and pass them as government responsibility.

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Sunday, August 25, 2013

Fat Free Econ 46: On Pork Barrel Aboition

* This is my article today in interaksyoncom.
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MANILA - From Countrywide Development Fund (CDF) to Priority Development Assistance Fund (PDAF) and now a reformed pork that has yet to be named. The legislators' pork barrel is not truly abolished but only reformed.

The pork barrel system can truly be eliminated, but that would mean a significant shrinking of the Executive branch -- in budget, subsidies, size of the bureaucracy and regulatory powers. Because an activist and really independent legislature will disallow unnecessary spending. Are the people ready for this scenario?

The President announced last Friday that he is abolishing PDAF. A reformed budget for legislators’ special fund will be set up subject to the following guidelines:

1. Projects to be funded to come from a specific menu of qualified projects;

2. Disallowed are soft projects: fertilizers, seeds, medicines, medical kits, dentures, funding for sports fest, training materials, and other such items;

3. Disallowed are temporary infrastructure, dredging, de-silting, re-gravelling, or asphalt-overlay projects;

4. Funds cannot be disbursed to NGOs and certain GOCCs, such as ZREC and NABCOR, both of which, along with others, will be abolished;

5. Funds must be limited to the district or sector of the legislator who sponsored it;

6. All items will be subject to open and competitive bidding, with all bid notices and awards posted on the Philippine Government Electronic Procurement System (PhilGEPS); and

7. For transparency, each will be disclosed in the DBM and related agency websites, as well as the National Data Portal of the government.

This means legislators’ pork barrel system will continue but (a) limited to hard projects like new roads, (b) coursed through line departments, and (c) pass through competitive bidding.

Pork barrel a compromise

Legislators’ pork barrel is a compromise allowed by the President so the former would support certain spending and revenue-raising measures. Aside from the explicit pork barrel -- which is a separate item in the National Expenditure Program (NEP) -- there is also an implicit pork in the form of “budgetary insertion” by legislators. They can cut the proposed budget of certain agencies they do not like, then increase the budget of another agency that is friendly to them, with the implicit arrangement that the legislators, or even some Congressional staff, will get a portion or the entire amount of such hike in the agency's budget.

The national budget hit P1 trillion six years ago, while the P2 trillion is upon us this year. The P3 trillion budget will be reached in 2016 or 2017. The public debt stock is rising by around P400 billion a year. Interest payment is rising to P313 billion in 2012, P333 billion this year and P352 billion next year.

This expansion of public spending, borrowing and debt payment -- as well as new or higher taxes -- was made possible because the legislators had allowed it, because they have a "share" of that huge spending, through pork barrel and Congressional insertion. If we disallow the legislators their “share” or claim to the national budget, they will become activist and more independent minded, and they will disallow such uncontrolled expansion in spending, borrowing and taxation by the Executive branch.

Breeding grounds for cronyism, patronage

Many government-owned or controlled corporations (GOCCs) and government financial institutions (GFIs) are breeding grounds for cronyism and political patronage. Some big supporters and financiers in previous elections who cannot be given Cabinet positions are appointed as president or board directors in GOCCs and GFIs. For instance, the National Food Authority (NFA) is among the perennially losing GOCCs and deficit generators.

If these GOCCs are to be scrutinized by an activist and really independent Congress, most likely they will be stripped of their funds and privatized, or at least be significantly shrunk as they contribute more to losses and hence, more public borrowings or more taxes. To avoid this, legislators are given their own share of pork so they will allow continued waste and inefficiency in the Executive branch.

The Bottom up Budgetting (BuB) system or related schemes have allowed NGOs, people's organizations and civil society organizations (CSOs) to "insert" their own favorite projects, their own “pork" in the budget. It is P8 billion plus this year and P20 billion next year. LGUs too have their own projects inserted in the budget, on top of their IRA and locally-funded projects.

If legislators are to be true to their mandate to scrutinize and disapprove certain huge budgetary requests and endless subsidies, the national budget will shrink. But many people who clamor for "pork abolition" do not want that either. They want their own subsidies and pork retained or expanded while stripping legislators of their share in the loot.

"Freedom from debt" requires "freedom from borrowing"

Most people who demand a "spend-spend-spend" policy are not aware that previous overspending has resulted in over-borrowing, so the interest payment is a big penalty on the public. To get a P10 billion increase over the previous year's budget for the favorite department, people may jump with joy. But to pay P350 billion in interest on debt does not bother them.

We will never have "freedom from debt" unless we adopt the "freedom from borrowing" mentality. Public education among other social sectors are among the most inefficient and wasteful. When you provide books and education for the poor -- from elementary to college and even graduate studies -- the result should be productive people able to help themselves out of poverty. Only one generation of useful and effective spending and poverty should have been controlled many decades ago. But this never happened. The inefficient, wasteful and even corruption-laden service delivery was made possible, was never questioned or controlled by the Legislative branch because lawmakers benefited from such wasteful public spending.

A corrupt and wasteful legislature can tolerate a corrupt and wasteful Executive branch. And many people -- ordinary citizens, businessmen, consultants, academics, etc -- have huge supply or consulting contracts with, or foreign aid-assisted projects implemented by the Executive branch.

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