The weakest link in public finance

Published October 14, 2020, 6:00 AM

by Milwida Guevara

We do not need to be convinced at how the budget has become the weakest link in public finance.  We just need to look at the intramurals happening in the Lower House. Budgeting has become a matter of lusting for power—and the resources that go with it.

The most critical tool of public finance is the budget.  It is the mechanism through which money is transferred to the poor and is appropriated to finance projects that can spur growth, generate employment, and finance public goods and services to promote the citizens’ welfare.

But there is a big disconnect between how citizens would like to see their money spent and where it actually goes.  There is the absence of a link between citizens’ preferences and the decision-making process.  This is termed as the principal-agent problem.  How can citizens, the taxpayers, ensure that their Congressmen, Senators and bureaucrats act on their behalf?

By virtue of their appointments, bureaucrats decide on what they think is good for the country.  Armed with their Excel spreadsheets, theories from their graduate studies, and advice from experts, they propose a budget. The P4.5 trillion budget for 2021 is intended to enable the country to “reset, rebound and recover”.  P1.1 trillion, or 25% of the budget, will finance infrastructure.  The amounts intended for social protection are measly in comparison: P149 billion for social protection, i.e. the marginalized and vulnerable, and, only P22 billion is intended to assist industry and livelihood.  While government announced that vaccine is going to be available to the public, only P2.5 billion has been earmarked for it. 

The Health secretary clarifies that this amount will only procure vaccine for 3.8 million Filipinos.

The thrust on infrastructure is presented by government as its strategy for economic recovery.  Bu there are many sectors who believe that spending for health and social protection  should have been given equal importance  The stimulus fund from Bayanihan 1 and 2 has been inadequate to support the provision of health care and a lifeline for the poor.

The “peoples’ representatives” were elected to listen to “divergent views” and present them during debates.  But we still have to hear of Congressmen holding broad-based consultations with their constituents.  Consultations in both Houses are limited to grilling bureaucrats and asking them to defend their budgets.  Committee hearings could have been opportunities to demand accountability from department heads by evaluating the outcomes of their work and measuring the ROI from their use of public fund.  Instead, committee hearings are used as a platform to ask government officials why patronage was refused for their protégés and pet projects. 

Budgeting suffers from the “tragedy of the commons”.  Legislators and government officials look at the P4.5-trillion budget as a “free resource” and impose excessive and personal claims on it.  They would certainly be more careful if they were spending their personal and family income.

We can think of several maladies that disable the budget from becoming an instrument of progress and social justice.  The distribution of pork barrel buys influence and votes.  Deals are made through horse trading, i.e. “I’ll scratch your back if you scratch mine”.  Decisions on priority expenditures are influenced by vested interests.  But we, the citizens, contribute to the greatest cause of the budget’s infirmities by allowing ourselves to be duped by incompetents, the liars, and the corrupt.    

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