Last call

Sorry to harp on the subject once more: our legislators need to get their act together and pass the 2007 national budget. So much depends on their doing so.

The failure, for three years now, to pass a national budget appropriate to our nation’s needs has hampered our economic performance. Bright as that economic performance is, it could have been even better. The opportunity costs are borne by the poor above everybody else.

By failing to pass the national budget, Congress has prevented the executive branch from increasing spending on vital social services including education and health. It has prevented government from embarking on a well-planned set of large infrastructure projects that would have directly created hundreds of thousands of jobs and encouraged the growth of enterprises that would employ even more into the long term.

By failing to pass the national budget for three years running, Congress has prevented government from addressing the pressing wage concerns of public sector workers. That has made life miserable for over a million workers on the public payroll. It has helped hold back consumer demand and withhold disposable income that might have helped fuel the growth of the housing sector.

Since 2004, opposition politicians and those (almost literally) gunning for a quick route to power, hindered passage of a new budget because it could help the administration coalition win elections or save the President from being deposed by those whose cynicism matches the proportions of their ambitions.

But by trying to make the administration fail, they make the nation suffer.

Never in our political history have we seen so brazen as to lie in the contrived controversies they created to bring down a presidency. Never have politicians been so callous as to cause our people misery by denying opportunities for economic salvation.

It is true what some of our detractors have said: in this country, in the sacred name of democracy, we have allowed unmitigated politicking to tax our progress as a people.

The adverse consequences of previous failure to pass a national budget is magnified by some of the salient characteristics of our economic position.

We have, for instance, gone through a rather anomalous period where growth in investments trailed growth in the gross domestic product. Had the previous three years’ budgets been passed, government might have made the economic investments to close that gap. But since Congress prevented government from doing so, we now experience what some might describe as "jobless growth."

Jobless growth happens only when consumption, almost single-handedly, drives economic expansion. There can never be new jobs if there are no new investments.

The latest economic freedom index shows the Philippines lagging even farther behind our neighbors because our policy environment continues to be hostile to investments, beginning from those really stupid provision in the 1987 Constitution that more properly belong to the 19th century. That explains why we are getting so small a share of investment flows into this most dynamic region of the world.

Again, on an election year, the power-starved politicians of the opposition are standing in the way of a more appropriate national budget. They are afraid that government, flush with funds, would have an even better chances of winning the midterm elections.

They allow short-term partisan considerations to get in the way of long-term national interests.

Those considerations are entirely delusory. By reenacting previous budgets, Congress only prevents public sector workers from getting better wages, socials services from being delivered more abundantly and infra projects from taking off. Reenacted budgets allow the chief executive to reallocate previously expended budget items with a freer hand than she would if a new line-item budget is passed.

The irony of it all is that while Congress dilly-dallies on passing a new budget, with a real danger of merely reenacting the insufficient old budget, government is now better able to spend more for our people.

The yearend tallies show an extremely positive picture. Our debt-to-GDP ratio has fallen dramatically to very manageable levels. Government has successfully floated, early in the year, US$ 1 billion in bonds to cover all financing needs for the year. The peso is surging. Interest rates are dropping, forcing a lot of the liquidity to migrate to the equities market, which is now poised to break record highs.

We have a strongly positive balance of payments position and billions worth of Chinese money in the pipelines for major business projects. The price of oil, one of the wild cards in our development forecasts, appears to be stabilizing. At any rate, we are importing less and less oil as we substitute imported fuel with locally sourced substitutes – including geothermal plants, natural gas and, now, with Migs Zubiri’s law signed, biofuels.

Our revenue-generation effort has snapped into place, reducing the need to introduce new taxes and closing the deficit gap ahead of schedule.

The BIR, ably led by Commissioner Jose Bunag, has posted a 22.2% collections improvement from 2005 levels on what is called the "fair targets" or those within the agency’s operational control. Those outside the "fair target" include collections from interest payments (dropping due to the good news of a low interest rate regime) and income from the sale of government treasury bills (also dropping because we are in that beneficial situation where government is borrowing less).

On its fair target collection, the BIR posted an increase in 2006 over the 2005 level of P116.5 billion. If the national budget in not passed, government will have more money in its hands than it could spend. That will be sad news for the poorest of the poor, who require expanded social services and highly targeted subsidies.

Early this year, we are also expecting upgrades in our credit ratings. That will not only make public financing less costly, it will also signal foreign investors that the Philippines is the place to be at this time.

The only piece lacking in this highly encouraging picture is an adequate budget that will enable government to build infrastructure to absorb the larger flows of investments into our economy. And that sorely missing piece is within the power of Congress to gift our people with.