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Public finance and UPSE’s PDE batch 33


My Cup Of Liberty

The Philippines’ public debt stock continues to increase big time, from P8.22 trillion (actual + guaranteed) in 2019 to P10.25 trillion in 2020, P12.15 trillion in 2021, and P13.18 trillion in April 2022. This is due to huge borrowings — from a monthly average of P73 billion in 2019 to P208 billion in 2020, P188 billion in 2021, and P291 billion in January-April 2022. (See last week’s column: https://bit.ly/Oplas053122.)

There are many elephants in the room when it comes to public spending, big issues and problems that people try to avoid discussing as they can cause discomfort to many other people. The article last week identified one — that while millions of people in the private sector lost their businesses and jobs during the lockdowns 2020-2021, the number of government personnel, from national down to barangay levels, stayed intact and their salaries, allowances, and bonuses continued to be given.

This piece will briefly discuss three other elephants in the room — the rising pensions of military and uniformed personnel (MUP), climate expenditures, and endless subsidies to government corporations.

From the Department of Budget and Management (DBM), Budget of Expenditures and Sources of Financing (BESF) 2022 report, the special purpose funds have trillions, with four of these comprising 38% to 41% of the annual total budget from 2020-2022 (Table 1).

The first elephant in the room (ER) is the huge, monstrous pensions given to MUP — P153 billion this year or 21.5 times higher than the pensions of all civilian personnel combined (government teachers and doctors, engineers and agriculturists, diplomats, and so on).

The burden to taxpayers of MUP pensions is so huge that either it should be cut, or the MUP should also contribute a huge amount to the fund.

The second ER is the rising and bottomless spending on the climate because hundreds of billions of pesos yearly from taxpayers will fight less rain and more rain, fewer floods and more floods, fewer storms and more storms, etc. Climate spending by the National Government was P184 billion in 2020 and P284 billion in 2022. This is excluding climate spending by local governments from their own local funds.

The “Global Tropical Cyclone Frequency” and “Global Tropical Cycle Accumulated Cyclone Energy” (ACE) from 1970 to 2022 are not steadily rising but simply fluctuating. Good data from Dr. Ryan Maue can be found here: https://climatlas.com/tropical/.

The volume of annual Arctic and Antarctic Sea ice from 1981 to 2022 is not steadily declining but simply fluctuating. Check the official data from the Japan Aerospace Exploration Agency (JAXA), the Danish Meteorological Institute (DMI), Norway’s Nansen Environmental and Remote Sensing Center (NERSC), the US’ National Snow & Ice Data Center (NSIDC), and more (see https://wattsupwiththat.com/reference-pages/sea-ice-page/).

There is no “climate crisis” to justify huge climate spending from taxpayers and energy consumers.

The third ER is the bottomless subsidies to government corporations and financial institutions. These are supposed to be earning and not subsidies-dependent agencies. And many of them should be in the hands of the private sector, subject to competition, expansion, or bankruptcy. Like the SSS (Social Security System) that gets annual contributions from members then got P51 billion more from taxpayers in 2020 (Table 2).

One way to reduce the public debt is to privatize many government corporations and spare the taxpayers from any tax hikes, or have tax cuts in commodities that are necessary for households and industries like energy products.

In the same column last week, I mentioned that incoming Finance Secretary Benjamin Diokno and returning National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan were both my former teachers at the Program in Development Economics (PDE) of the UP School of Economics (UPSE) batch 33, school year 1997-1998. The Dean of the school at that time was former NEDA Secretary and incoming Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla.

The PDE Director that time was Prof. Ruperto Alonzo (RIP), a very kind and warm teacher for 45 years who became UP Professor Emeritus, and was NEDA Undersecretary in 1998-2000 under the Estrada administration. He also became a godfather at my wedding.

PDE is a graduate program designed for mid-level government officers and junior technocrats, so the course content is applied economics with deep theoretical background. Many of my classmates have stayed in government and excelled in their fields. Among them are the following:

Marilou Mendoza is now Chair of the Tariff Commission (TC). Two classmates pursued PhDs — Florante Victor Balatico, PhD Agricultural Economics from UP Los Baños (UPLB) and now the Campus Executive Officer (CEO) of Cagayan State University (CSU) Lasam campus; and Joselito Basilio, PhD Economics at the University of Illinois at Chicago, now Principal Researcher at the BSP Research Academy.

Three classmates became academics. Joey Sescon and Malou Perez are teaching at the Ateneo Economics Department, and Raymund Addun is teaching at the Ateneo Environmental Science Department (he finished his MS in Ecology in Spain).

Maliz Guan-Aragon pursued law and is now the presiding judge in Magallanes, Sorsogon. Other classmates are working at the Department of Agriculture, the Bureau of Internal Revenue, and the Philippine Statistics Authority (PSA). Others have retired already — from the PSA, the Supreme Court, the Department of Education, and the Technical Education and Skills Development Authority (TESDA).

Two classmates went to the private sector. Cynthia Hernandez is now the Deal Advisory Principal Sector Head for Infrastructure, Sector Head for Energy and Natural Resources, KPMG. And Mark Agaloos is now Vice-President for Middle East, LBC.

But the most prominent among us is Amenah “Mina” Pangandaman, the incoming Secretary of the Department of Budget and Management (DBM). Back then we would occasionally make fun of her because she was the youngest in our batch at 21 years old, a fresh graduate of BS Economics from Far Eastern University. She has a good sense of humor.

Working her way in government, she became the Chief-of-Staff (COS) of former Senate President Edgardo Angara, then COS to the Chairperson of the Senate Committee on Finance, Senator Loren Legarda.

Then she moved to DBM when Sir Ben Diokno was Secretary under the Duterte administration. Sir Ben promoted her to DBM Undersecretary, supervising the Department Liaison Office and Budget Technical Bureau.

When Sir Ben became BSP Governor, he brought Mina along and she became Assistant Governor for Strategic Communication and Advocacy and Executive Offices Coordinator. And when Sir Ben was appointed as the incoming Finance Secretary of the Marcos Jr. administration, I thought that Mina would be one of the Finance Under Secretaries. But Mina has matured enough to be a Cabinet Secretary.

The Development Budget Coordination Committee (DBCC) is composed of four agencies — the DBM, the Department of Finance, NEDA, and BSP. The Council prepares the yearly budget, the revenues to fund it, and the macroeconomic assumptions that justify the spending-funding-borrowings outlook. And the heads of these four agencies are all from UPSE, all are non-politicians and plain technocrats with decades of experience in government.

I am hopeful that more market-oriented economic reforms and growth-enhancing policies that are non-burdensome to taxpayers can be fast tracked. I did not expect this under the Ferdinand Marcos, Jr. administration but it is there, a really good start. Looking towards more social and economic prosperity for the country and the Filipinos.


Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.


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