Paradox, paradigm of thrift

A couple of months ago, Finance Secretary Cesar Purisima and Budget Secretary Florencio Abad said that the country had received favorable ratings from international credit ratings agencies because of their so-called good fiscal management.

But what Purisima and Abad as well as the other members of the economic team did not tell the people is that such ratings were a result of the government’s penny pinching methods, not because of increased economic activity.

Such frugality led the International Monetary Fund to reduce the country’s growth forecast next year. In fact, IMF said in its World Economic Outlook report in September that it “expects growth this year and in 2012 at 3.7 percent and 4.2 percent, respectively, below its previous forecasts of 4.7 percent and 4.9 percent.”

This is from a high of eight percent during the last days of the Arroyo administration 18 months ago.

The problem was it took Abad and Purisima all these months to realize that public spending is needed to buoy the economy. So now, they are now scrambling for a strategy to spur growth. On Dec. 6, the economic team met to discuss a battle plan that they hope will stave off the financial firestorm in Europe and the lackadaisical economic performance of the United States.

They should have done that several months ago. Zambales Rep. Mitos Magsaysay and Quezon Rep. Danilo Suarez thus called on President Aquino to fire the members of the economic team. They said that the economic team apparently squandered 18 months to build a strong economy. According to Magsaysay, the economic momentum President Aquino inherited from former President Arroyo is clearly running out, and that the President has cold bloodedly decided to pursue his trial by publicity of Mrs. Arroyo, inciting the mob against her in order to distract the public’s attention away from his own dismal performance.

Abad acknowledged that the global crisis will dampen growth and said after the meeting that demand from the outside is going to be weak and we will have to depend on consumption or demand from within.

So, how are we going to encourage spending when the government plans to impose more taxes? More taxes mean higher prices on consumer products. Higher prices will only discourage people from spending.

The economic team should have focused on improving tax administration. For instance, they should have been aggressive in going after smugglers, who had denied the government over P100 billion as estimated by the Federation of Philippine Industries. The team should have also thought of expanding the tax base as advised by the IMF and the credit rating agency Standards and Poor.

Not so hidden agenda

Adobo Magazine has reported that DDB Philippines has scored Asia’s lone Gold Bullet after it was named Design Agency of the Year by YoungGuns International Award. Congratulations to Gil Chua and his team for bringing glory to the country as well.

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