Abnormal stimulus

The abnormality of the Disbursement Acceleration Program (DAP), supposedly crafted as a stimulus to our economy, can best be appraised from the perspective of how other countries managed their economic stimulus to cope with the consequences of the 2008-2009 Great Recession.

To revitalize their economies, many nations have enacted fiscal stimulus plans. These plans were based on the theory of the British economist John Maynard Keynes that during a recession, a government can boost the economy through massive spending on infrastructure, welfare and job-generating projects.

US President Franklin Delano Roosevelt is credited with initiating increased government spending during the Great Depression in the 1930s to provide jobs for millions of unemployed Americans, who constituted 25 percent of the total population.  His “New Deal” program, then known as pump-priming, helped a great many Americans survive the Depression until the economy revived, especially after World War II.

The DAP was crafted by the Aquino administration as a “stimulus package” after the growth rate of our gross domestic product (GDP) went down during the first year of President Aquino’s administration. Some analysts blamed the downturn on the slow implementation of projects resulting from a rigorous scrutiny conducted by the new administration of the viability and financial integrity of the projects handed down by the Arroyo administration.

In his nationwide address last July 14, Mr. Aquino said, “Although it wasn’t our intention, fixing the budgeting process stalled the public sector’s contributions to the economy. Because of underspending, our GDP went down.” It was then decided by the government to stimulate the growth of the economy in the next year by resorting to freer and faster spending of the national budget.

The stimulus program was proposed by Budget Secretary Butch Abad in a memorandum to the President in October 2011. Abad proposed the use of “savings” from existing appropriations in the General Appropriations Act  (the budget) and transferring or reallocating budgetary items to other projects, whether or not they are included in the GAA.

Technically, there has been no recession in the Philippines. According to economists, the “technical indicator of a recession is two consecutive quarters of negative economic growth as measured by the country’s [GDP].” There was no negative growth, only slower growth.

However, the purpose of the stimulus package for the global recession and for the slowdown of GDP growth in the Philippines was the same, namely to step up economic growth. The President and Abad credit their stimulus for the increase in GDP growth to 6.8 percent in 2012 and 7.2 percent in 2013, said to be the highest GDP growth rate in the world, next only to China’s.

In the United States and other countries, the stimulus package took the form of legislative acts passed by Congress and approved by the president in accordance with their democratic and constitutional processes. The procedure followed in the Philippines was solely through executive action, without the participation or express authority of Congress.

In 2008, the US Congress passed—and then President George W. Bush signed—the Economic Stimulus Act of 2008, appropriating $152 billion, including $600 tax rebates to low- and middle-income Americans. The tax rebate would boost the purchasing power of Americans. The American Recovery and Reinvestment Act of 2009, enacted by the US Congress and signed by President Barack Obama, authorized the stimulus spending of $787 billion for infrastructures, social welfare and job creation.

In 2009, the Japanese legislature, upon request of Prime Minister Taro Aso, passed a third Stimulus Act appropriating 15.4 trillion yen for an employment program and new car subsidies, equal to 2 percent of Japan’s GDP. The South Korean Congress enacted a stimulus program for 14 trillion won ($10.8 billion) for an employment and infrastructure building program. The same process was followed by European countries.

In the Philippines, the stimulus package was adopted and implemented solely by the President and his budget department, without securing the participation and assent of Congress. Millions in stimulus pesos found their way to fake nongovernment organizations for the conduct of seminars on flower arrangements and earthworm fertilization, convention centers, and some minor infrastructures.

The way the local stimulus was crafted was a contravention of the constitutional principle that the power of the purse belongs to Congress, and that the executive branch has the authority to spend public money only in accordance with the instruction of the people’s representatives as expressed in the budget. Thus, according to the Supreme Court, the use of “savings” and “cross-border” reallocation of budgetary items, not authorized by Congress, was unconstitutional.

King Charles I of England was beheaded in 1649 for levying taxes and spending these without the consent of Parliament, and the American Revolution broke out under the principle of “No taxation without representation.” Spending government money is the obverse face of taxation.

An additional irregularity in our stimulus was the practice of inviting favored individual members of the legislature to designate the projects on which the DAP funds were to be spent. Under our Constitution, only the House and the Senate, acting collectively, can do this. Some favored legislators were allowed to designate private organizations—for example, NGOs—to handle the spending of the public funds, contrary to the tenet that only public agencies can spend public money.

Thus, the underlying principles of democracy, its checks and balances governing the relations of the three principal branches of government, were jettisoned.

How can this happen in a country whose people and their leaders have been supposedly educated in the democratic values of Apolinario Mabini, Thomas Jefferson and Franklin Delano Roosevelt? Have we elected amateurish politicians, or politicians whose obsession for private profit have steered their look at public office as a private office or a private property? These are crucial issues that call for urgent solutions.

Manuel F. Almario ([email protected]) is a semiretired veteran journalist and spokesperson of the Movement for Truth in History.