Are subsidies/dole-outs sustainable?

FROM FAR AND NEAR - Ruben Almendras - The Freeman

Since the onset of the BBM administration, with the continuous rising prices of fuel oil, commodities like rice, sugar, onions etc., and the increments in the hunger and poverty levels; various subsidies to public transport workers have been given, and dole-outs to the poor have increased. On top of the “Pantawid sa Pamilya Program” (PPP) monthly payments, there are now food stamp programs, and rice and food items at government-subsidized stores. Redeemable fuel coupons have also been given off and on to jeepney and taxi drivers. These are all well and good as long as it really gets to those deserving and ease the living conditions of those below the poverty line. The other relevant issue, is if these programs are sustainable and for how long, and if there are better long-term solutions for the government and the Philippines.

Going over the annual national budget of 2023 which is ?5.3 trillion, it is estimated that ?530 billion will be spent for dole-outs and subsidies. The PPP program already accounts for ?116 billion and another ?100 million for health and family care for indigent families over and above the PhilHealth coverage of indigent families. Another ?250-plus billion are in the form of subsidies that are coursed through the different departments and the local governments. This amount is already 10% of the 2023 Annual Budget and 2.3% of the Philippine GDP. This would be less worrisome if the annual government revenues could cover these expenditures, or if the government debt is lower than the current ?14 trillion as of July 2023. With the annual obligatory debt servicing for interest and principal at ?1.3 trillion, all government expenses over ?4 trillion are borrowed money including all these dole-outs and subsidies.

In the above situation, if the Philippine government was a household, the household/government would be financially stressed as its annual income/cash flows are much lower than its expenses. Most times we would still help needy relatives and friends because we expect that their needs are temporary and our incomes will improve over time. We believe that they will eventually find a long-term solution. But in the case of the Philippine government, these dole-outs/subsidies are not temporary but permanent and increasing obligations which are funded by increasing borrowings. These are on top of the recurring operating expenses of running the government, the capital expenditures for infrastructures, the ballooning pension liability of MUPs, the excessive salaries/perks of government officers, the confidential/intelligence funds, the pork barrel, and other graft/corruption leakages.

While countries or nations do not go bankrupt as its geographic natural resources and human assets will always exceed its liabilities, governments can go bankrupt as they do not own all the country’s assets. When governments are unable to service their debts, they are technically bankrupt like what happened to Greece, Sri Lanka, Lebanon, Myanmar, and Argentina. It is difficult to foreclose on country or government assets but additional borrowings will be very difficult and the defaulting country suffers from shortage of vital commodities and services which leads to socio-political unrest. Making incumbent governments living on borrowed time and borrowed money.

It is unrealistic to eliminate government subsidies/dole-outs in any country as there will always be an economically-distressed portion of the population. The objective of all governments is to make these subsidies/dole-outs affordable and sustainable. High economic growth which provides employment opportunities together with improving the capacity of the vulnerable sectors to provide for their needs are the long-term solutions. These need a credible government that practice good governance that will get investments/consumer confidence, and a progressive education sector to upgrade the skills and competence of all workers. To paraphrase the adage, “give him food and he will eat for a day, educate him and he will eat for years and elect better government officials.”

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