Politicians are the same everywhere

You can’t use logic if you want to understand how politicians think. You must read between the lines to figure out personal motives and agenda. It could be ideological or something more down to earth like pecuniary interest. Most of the time, as in 99.99 percent, it is pecuniary disguised as ideological. Let us look at two examples, one from George W. Bush and the other from Ate Glo.

Economists have warned that Bush’s $726-billion tax cut plan is likely to cause serious problems for the economy moving forward. Bush is now justifying his $726-billion tax-cut plan on the grounds that it will create 1.4 million jobs. But economist Paul Krugman asks, "At what price would those jobs be created? By price I don’t just mean the budget cost; I also mean the cost of sacrificing other potential pro-employment policies on the altar of tax cuts."

According to Krugman, "once you take those sacrifices into account, it becomes clear that the Bush plan is actually a job-destroying package. Not that the budget cost is minor. The average American worker earns only about $40,000 per year; why does the administration, even on its own estimates, need to offer $500,000 in tax cuts for each job created?"

Thus, it is clear that even if one uses the number of jobs Bush says his plan will create and do some fairly simple number crunching against the cost in terms of lost tax revenues, the cost to benefit situation is far from positive. Still, if you take Bush’s word at face value and agree that it’s all about jobs, Krugman asks, "wouldn’t it be far cheaper just to have the government hire people?"

Krugman also demolished the argument of Bush that the tax cuts aim for long term growth. He cites "a new study by the Congressional Budget Office, now headed by an economist handpicked by the Bush administration. It concludes that the Bush plan may have either a positive or a negative effect on long-run growth, but that in any case the effect will be small."

Perhaps the insistence of Mr. Bush to get his tax cuts through is ideological. Most likely, it is his way of paying back the fat cats who bankrolled his presidential campaign and will continue to bankroll his re-election effort. The tax cuts are lopsided in favor of the fat cats in American society. The cuts are also not expected to put enough money in the hands of common consumers who can be depended upon to quickly turn around and spend the money shopping or buying a house and, thus, move the economy out of possible recession.

Back here in Manila, a similar typical politician’s magic act happened. We all know about how bad our fiscal deficit problem is. Yet, it was aggravated by Ate Glo’s quick fix "solution" to the problem of that PPA component of our power bills. The tragic thing is, we have allowed ourselves to be fooled, as this posting in the Plaridel e-group explains.

To recall: the anti-PPA campaign was peaking around April last year. The PPA was at its highest: P3.30 per kwh.

To take away the thunder from the anti-PPA rallies, GMA issued a memo to the NPC on May 8, 2002 ordering it to reduce its then P1.25 PPA charges to only P0.40, resulting in a huge cut of P0.85. This reduced the total Meralco PPA to P2.119 per kwh the next month. Nakahinga ng maluwag si GMA at nabawasan ang kumpas ng mga picket/rallies vs PPA.

But another effect of that order, aside from reducing the PPA of NPC, is that the NPC was to lose an average of P2.5B a month because of the uncollected PPA cutback of 85 centavos per kwh.

Where to get the money? The NPC board passed a resolution (No. 2002-02) authorizing the NPC to secure an initial loan of $100M (or, P5B, good for 2 months replacement of the lost PPA).

How is the loan to be paid? The resolution said it quite plainly that the loan "shall be recovered through the Universal Charge as and when approved by the ERC." In other words, you and I will pay for the loan, which is the same as saying that the PPA we did not pay then will still be paid, but this time with interest.

From May 2002 to March 2003 is 11 months. At P2.5B per month, that is about P27.5B. Wala pa diyan yong simula April 2003.

Maaring ang iba ay nagtataka dahil alam naman ni GMA (PhD in Economics at kung anu-ano pa ngang letra ang dinudugtong sa pangalan) na mangyayari ito, eh bakit pa siya nagpakulo ng kunwari reduction sa PPA noong Mayo 2002? Kung sabagay, kung bumulusok ang popularity mo baka maisip mo rin ito laluna kung ikaw ay nangangarap ng re-election.

BTW, the PPA ngayon ay P2.89 na, halos malapit na sa level ng May 2002 kaya GRAM at ICERA at Universal Charge naman ang pakulo, sakay sa unbundled rates na may embedded PPA. Parang naglolokohan lang, ano? Kung pagpupukpukin ang mga ulo nito, titino pa kaya?

I said as much as this Plaridel e-group posting in a previous column. The point I want to bring out is, why didn’t Ate Glo take the bull by the horns and explain that the PPA is really part of the cost of generating electricity based on contracts signed by government and Meralco. The reason it is set aside as a separate item is because the ERB has failed to update the power rate to reflect actual cost of generation for many years and was content to just reflect such changes as PPA or CERA.

The take or pay provisions in the contracts, which seem onerous in the light of the less than projected demand for power today, are in themselves pretty standard in the industry. In any case, we wouldn’t have been able to convince the banks to finance those power plants without such a provision.

If there are anomalies involved, and I suspect there are, only a thorough investigation will reveal that. It was wrong for Ate Glo’s officials to demonize the power contractors with general statements because when the situation turns around, this experience will discourage future power investors to help us build additional capacities we will surely need. Given our lack of domestic capacity to raise the kind of capital needed for power projects, where would we go three or five years from now?

As for the PPA quick fix, I am not sure it is fair to make the taxpayers, specially future taxpayers, pay for power we consume today. The hocus pocus will just haunt us for some time to come, making it that more difficult to reform the power industry..

The Job Interview

Marilyn Mana-ay Robles forwarded this one.

An office manager was hiring an individual to fill a job opening. After sorting through a stack of resumes he found four people who were equally qualified. He decided to call the four in and ask them one question and their answer would determine who would get the job.

The day came and as the four sat around the conference table the interviewer asked, "What is the fastest thing you know of?" Pointing to the man on his right.

The first man replied, ‘A thought. It pops into your head. There’s no forewarning that it’s on the way, it’s just there. A thought is the fastest thing I know of."

"That’s very good!" replied the interviewer. "And now you sir?" he asked the second man.

"Hmm… let me see, A blink! It comes and goes and you don’t know it ever happened. A blink is the fastest thing I know of."

"Excellent!" said the interviewer. "The blink of an eye. That’s a very popular cliche’ for speed." He turned to the third man who was contemplating his reply.

"Well, out at my Dad’s ranch, you step out of the house and on the wall there’s a light switch, when you flip that switch, way out across the pasture the light at the barn comes on in an instant. Turning on a light is the fastest thing I can think of."

The interviewer was very impressed with the third answer and thought he had found his man.

"It’s hard to beat the speed of light," he said. Turning to the fourth man, he posed the question.

"After hearing the three previous answers, it’s obvious to me that the fastest thing known is diarrhea."

"What!?" said the interviewer, stunned by the response.

"Oh I can explain." said the fourth man. "You see, the other day I wasn’t feeling so well and ran for the bathroom. But, before I could think, blink or turn on the light, I shit my pants!"

He got the job!

Boo Chanco‚s e-mail address is [email protected]