Absence of a science-based culture

OUR policymakers, particularly the members of Congress, wont pass legislation without a thorough analysis of the budgetary implications.

Take for example the revised Centenarian Act of 2016, which stipulates that P10,000 in cash be given to Filipino citizens who reach the age of 80, with another P10,000 every five years thereafter until the age of 95. Upon reaching 100, the centenarian will receive P100,000.

First, there is no study as to who among our people reach that ripe age. I would hazard a guess that most come from well-off families because these are the ones who can afford regular medical checkups and expensive maintenance medicine. They can also indulge in sports and join gyms, play sports such as tennis or golf, bike or run and hike. The poor, on the other hand, do not have enough money to pay for medical checkups, maintenance medicines and sports activities.

In other words, the main beneficiaries of the new act are senior citizens who come from well-off families or have children who are professionally successful and hence can easily defray the costs of medicines and sports activities.

In addition, there has been no analysis rendered on its implications on the country’s fiscal position. It is estimated that around P3.1 billion will be needed for this purpose. Do we have enough of a budget to fully finance the populist law? Where will we get the money?

Another law being introduced in Congress calls for lowering the retirement age to 56 or 57 sans any analysis of the fiscal implications. In addition, PhilHealth is proposing a hefty increase in its medical support to breast cancer patients when it cannot even fully pay the debt it owes to hospitals and medical doctors.

And what about the Senate proposal to increase the minimum wage by P100 per day? (The House’s version is higher). Did this benefit from any economic and financial analysis on the overall impact on the economy?

The above cases glaringly illustrate that policy or decisionmaking in this country is hardly based on scientific studies. This is in sharp contrast to the experience of developed countries and is probably the major reason why we have not attained developed economy status.

In developed economies, a politician or top government official cannot introduce reform laws or measures without showing their positive fiscal and welfare implications. Solid evidence based on

scientific studies will have to be presented to justify passage of the reform measure.

Notice that during debates between a Republican and a Democratic presidential candidate in the United States, or Conservative and Labor candidates in the United Kingdom, the foremost question raised whenever a candidate promises to increase welfare spending is where they will get the money, or what additional tax measures will be imposed to meet the resource requirements of the promises.

This is a manifestation of the political maturity of the candidates and voters. They rely on scientific studies on what can be achieved given limited resources. They demand specifics as to how many resources will be needed and how these will be raised to fulfill their campaign promise.

We unfortunately do not have the benefit of a science-based culture. Even in the field of economic governance, we see a disjuncture among our economic, monetary and fiscal policies due to our reliance on gut feel and populist decision-making.

For instance, there are too many “ayuda” (handout) programs without regard to their fiscal and economic implications. The plethora of “ayudas” involves significant government expenditures, and we are not told how extra revenues will be generated to fund them. This can lead to wider budget deficits and eventually economic bankruptcy.

The rule of the populist government of Juan Peron of Argentina (1946-1952) is instructive. Peron poured massive amounts of money to build impressive public works, fund a complex set of social welfare programs and forced companies to increase salaries paid to their workers.

His government was also known for its dictatorial tendencies as it incarcerated thousands of dissidents, many of whom were killed. The press was censored or strictly controlled. Argentina also became a refuge for key Nazi officers trying to escape prosecution by the victorious Allied Forces.

While Peron became popular with the Argentinian masses, his rule led to the collapse of the Argentinian economy due to massive budgetary deficits. Inevitably, a coup threw him out of power because runaway inflation caused widespread suffering.

We are now seeing the initial result of gut-feel and populist decision-making by our policymakers as national government debt has ballooned from close to P12 trillion in 2021 to more than P14 trillion in 2023 — a span of just two years.

If the government maintains its “ayuda” mentality, we will end up incurring more debt this year. There are predictions that it will worsen the following year because of a spending binge that is expected to happen due to elections.

Without someone in the government playing the task of a “bastonero” (band leader) aligning our economic, monetary and fiscal policies, the future does not seem to bode well for “Bagong Pilipinas.”

I hope that Special Assistant for Investments and Economic Affairs Frederick Go can play this role more actively to avert the threat of a serious fiscal imbalance for the country in the very near future.