Conditional Cash Transfers program

The Austerity of Hope

Has PNoy’s righteous path unintentionally led to more misery?

In 1973, a book co-authored by public policy guru Aaron Wildavsky was published. It had a very verbose title that read: Implementation: How Great Expectations in Washington are Dashed in Oakland; Or Why It’s Amazing that Federal Programs Work At All; This Being a Saga of the Economic Development Administration by Two Sympathetic Observers Who Seek to Build Morals on a Foundation of Ruined Hopes.

The book examined the EDA, an agency that still exists today and is located within the US Department of Commerce to show how policies conceived with the best of intentions at the top, get corrupted and bungled on the way to implementation. It is a cautionary tale on the limits of idealism and noble intentions, a vivid exposition of that oft repeated phrase that the road to hell is paved with good intentions.

There can be no more apt way to depict the manner the PNoy presidency has conducted itself during its first year in office. The Filipino equivalent, which goes, maraming namamatay sa maling akala (or many perish because of false assumptions), also rings true. The president to be sure entered the Palace with nothing but the best of intentions propelled by the highest hopes of the people with a vision for

a re-awakened sense of right and wrong, through the living examples of our highest leaders…a collective belief that doing the right thing does not only make sense morally, but translates into economic value as well (from the Liberal Party’s Social Contract).

The movement that had pushed him to enter the derby wanted a person whose reputation would contrast with the existing field. The election was to be framed as a contest between Good and Evil, Light and Darkness, anchored on the moral superiority of their cause.

When he announced his candidacy, Benigno “Noynoy” Aquino used the words of an admirer to capture the moment, in that “we can finally dare to have hope once more.” He was declared the Philippine equivalent of Barrack Obama, whose book The Audacity of Hope inspired the 2008 presidential campaign slogan, Change We Can Believe In.

At his inaugural, the Benign One pledged that

(t)hrough good governance in the coming years, we will lessen our problems. The destiny of the Filipino will return to its rightful place, and as each year passes, the Filipino’s problems will continue to lessen with the assurance of progress in their lives.

During his first formal address to Congress, the president stated that the nation faced a fork in the road. On the one hand was the quick and easy path that led to destruction, while on the other was the long and arduous one that led to deliverance. He pledged to take the nation straight down the Righteous Path or Daang Matuwid.

In his first budget statement, he fulfilled a campaign pledge to institute a zero-based budgeting approach to weed out anomalous projects and programs. Only those considered necessary and above board would receive funding. On balance it was a frugal budget, less than 2% above the previous year’s before accounting for inflation, which meant that he had effectively shrank the government. This was meant to give himself a fighting chance to fulfill his “no new taxes” pledge to businessmen at the big end of town.

All of this was in keeping with the vision for a country with a new set of morals that would translate into economic value.

At the halfway mark of his first year in December last year, a number of positive trends seemed to indicate a very auspicious start to the president’s term. The growth momentum experienced in the first half of the year seemed to have carried through in the latter half.

Fast forward two quarters to today and all of the indicators seem to be pointing downwards. Not only has investor confidence been a bit more sanguine and consumer confidence turned sour, but poverty and hunger seem to be on the rise along with unemployment. Some of these headwinds are caused by external events like the uprisings in the Middle East and natural disasters in New Zealand and Japan, but could they also be self-inflicted handicaps?

What’s going on?

Well it seems that in their bid to control government waste and corruption, the administration has unintentionally created a situation where much of its programmed spending was held back (up to 20% in the first quarter alone). The massive withholding of spending amounting to close to 70 billion pesos in the first four months of the year (which when we factor in negative multiplier effects is really around 100-150 billion pesos or 1-1.5% of GDP) appears to have had an adverse impact as contractors stopped hiring and in fact layed off more workers.

This occurs at a time of rising cost of living presssures and as a fresh batch of new graduates are about to join the labor market. Despite spending more on conditional cash grants to alleviate the plight of the poor, the actions of the palace seems to have made life much worse for many of them. The government in effect seems to be giving with one hand while taking away with the other.

It seems that in seeking to treat the symptoms of moral degradation and heal the body politic, PNoy forgot the first maxim of the Hyppocratic Oath, which is to do no harm. Indeed as it nears the end of its first year in office, the government of the Benign One appears to have very little to show for its posturing on institution building and bringing about greater economic benefits of a cleaner, moral government: perhaps a case of great expectations dashed once more.

P-Noy’s “Penance” for the RH Bill

Heading into the Easter break, the president makes a pitch for his own version of the reproductive health bill. Could this be his way of making penance with the pro-RH cause for the sin of omitting their bill from his legislative priorities?

With his poll numbers slipping, the president has sought to present himself as being more pro-active in leading from the front rather than taking a hands-off approach on a number of issues. With respect to the impeachment trial of the ombudsman, we have seen him make pronouncements regarding the need to convict Ms Merceditas Gutierrez an appointee of and proxy for the former president Gloria Arroyo whose following in the house of representatives, President Aquino sees as a stumbling block for his social reform policies. These policies involve the winding down of the grains subsidy program and the scaling up of the conditional cash transfers (CCT) program.

Mrs Arroyo challenged the president’s priorities and questioned the government’s capacity to absorb the growth of the CCT a while back. Was she speaking from experience? When her government increased the budgets for agricultural inputs and micro-lending via the now derided fertilizer fund and the now financially troubled Quedancor, such questions were not raised by her. It is for failing to prevent such catastrophic policy blunders that the current president wants the ombudsman to run after officials of the former one.

Regarding the CCT program expansion itself, two things can be said:

  • First, when it comes to dispensing money as opposed to physical goods like fertilizer to farmers and grains to needy groups or acting like a financial intermediary in assessing loan worthiness of hog raisers, the infrastructure required and scope for possible leakage is much smaller. So scaling up the CCT is less prone to problems of corruption and wastage as the fertilizer and rice subsidy or micro-lending and swine programs were,
  • Second, when it comes to deciding what to spend on for poverty alleviation, the poor households through the women folk are best placed to make these decisions rather than any government bureaucrat. So giving cash directly to households through the existing banking infrastructure proves to be much more effective and efficient in terms of producing the kind of outcomes needed.

Now coming to the ultimate social reform policy (I say ultimate since it affects much of the MDG targets either directly or indirectly), the president choosing his audience wisely made an impassioned plea before graduating scholars of the country’s premier state university to be heard amid the ongoing rancorous debate over the RH Bill. His own proposal the RP Bill (responsible parenthood bill) differs from the former in that it envisions separate government run health centers to provide natural family planning counseling services as distinct from modern ones. At present the current RH Bill would have all the different forms of family planning services provided under one roof.

This he says was his way of making concessions to the Catholic clergy who suspended talks with him after the RH Bill got introduced into the plenary debate in Congress. The question is, does the amendment proposed by the president help secure more votes for the bill or not? Judging from the comments made on both sides of the debate, the answer is probably no. Many on the pro-RH side would see it as just a waste of funds. What would be the advantage of separating the providers of service? Wouldn’t it make more sense to have provision consolidated?, would be their main points against it. Those on the anti-RH side would still find objectionable the fact that the government will be promoting other forms of family planning that they deem immoral.

The spirit is willing, but the flesh is weak

So what benefit would introducing this new version of the bill bring? For those who have been advocating and waiting for it, this belated proposal would only threaten the passage of the current one making its way through the legislative grind. Such a proposal would be useful as a possible revision after the bill is enacted into law, if and only if it was found that consolidation produced unwanted and unforeseen consequences. Perhaps the only benefit is for the president himself, i.e. to justify his reasons for not prioritizing the RH Bill on the one hand, while claiming to be in principle behind it on the other. Splitting hairs, one might say, or quibbling over the details.

This hardly makes for decisive leadership. On the other hand, at least the president is saying he is with the RH cause in principle. Or in the spirit of the season, he would be saying that the spirit is willing, but the flesh is weak. And that in essence is what this whole debate may be all about.

A double edged sword

A news bulletin was released earlier this week with very little fanfare on the latest round of results for the Family Income and Expenditure Survey (or FIES). It showed that between 2006 and 2009, there was an improvement in the overall incomes, savings and expenditures of families on average and a reduction of income disparities between the wealthiest and poorest of households.

Prof Winnie Monsod of the UP School of Economics attributes this to a sustained period of economic growth peaking at 7% in 2007, the longest and highest rate over the past 30 years. Augusto Santos of NEDA on the other hand credits the conditional cash transfers program initiated by the previous government in 2008 as one of the policy interventions that could have led to this outcome.

All this would have served the Arroyo regime well had it been reported prior to or during the last presidential election, when it was seeking a mandate for its anointed successor. Its economic credentials were tarnished by reports of poverty incidence worsening between 2003 and 2006 contrary to what you would expect following a period of sustained economic expansion under her stewardship.

Of course one could argue that the increase in the VAT rate in 2005 from 10-12% which while regressive was also deemed necessary to avert a fiscal crisis caused all the grief. Government planners then quickly realized that the fiscal space they created had to be used to counter the harsh impact of higher taxes on the most vulnerable. This is what led to many of the socially targeted interventions including the Conditional Cash Transfers program (or CCT) and the infrastructure plan that followed. It now appears that they got it right although hardly anyone will trumpet these successes now.

All this points to the problems associated with time lags in measuring and reporting social and economic indicators for the purpose of crafting public policy. Data gathering always comes at a cost, but without frequent and timely reporting, policymakers are practically flying blind not knowing what impact if any their programs are having on the ground. It may not suit PNoy’s government to acknowledge the policy successes of its predecessor and arch-nemesis in the house, but it can also serve its purpose given that it is pushing for the expansion of the CCT and infrastructure through the PPPs.

According to Prof Monsod, the Gini coefficient for 2009 which reflects income inequality is “the lowest it’s ever been as far as I can remember.” If that is the case then it could account for improvements in the mood of the people as reported by some public surveys (the science of happiness suggests there is a causal link between income equality and happiness). It would also point to the importance of maintaining the momentum for growth through investments in public infrastructure as well as social policies that reduce income disparity like the CCT.

Agrarian reform which has a spotty record globally was an attempt to correct poverty and social inequality through asset distribution. That has proved difficult to implement in the Philippines. Now the CCT and other social programs like improving education and health are attempting to do it through income and human capital distribution.

If the policy settings of the previous government were effective in bringing about an improvement in economic and social well-being, then it would be a sign of maturity for all parties to come together now and work towards expanding them in a responsible manner. Enough with the bickering: it is time for a development consensus to be formed about the way forward.