Economic risks of federalism

With the way things are going, the administration’s plan to change the present form of government to a federal system seems headed for the rocks.

A survey conducted by Pulse Asia last June showed 62 percent of Filipinos were against the idea of shifting to a federal system of government.

This finding assumes greater significance in light of the fact that the proposed change was a major component of then candidate Rodrigo Duterte’s campaign platform in the 2016 elections.

Then Speaker Pantaleon Alvarez added to the public’s opposition to the plan when he suggested the cancellation of the 2019 midterm elections to pave way for the adoption of the federal system during President Duterte’s term.

As if selling federalism to the public was not challenging enough, two of the administration’s economic managers publicly expressed their opposition to the system change.

Finance Secretary Carlos Dominguez III said in a Senate hearing the country’s credit rating may “go to hell” if the proposed shift to federalism materializes. A credit rating downgrade would lower the Philippines’ creditworthiness and, in the process, result in higher interest rates on its foreign loans.

He added the shift could lead to massive government job cuts, reduced funds for the infrastructure program and widened budget deficit.

Socioeconomic Planning Secretary Ernesto Pernia also said the shift to federalism would directly cost the government P120 billion, on top of the additional costs that would be incurred in the disruption of government projects.

The statements of Dominguez and Pernia show President Duterte’s federalism plan does not enjoy unqualified support from his Cabinet. Unlike others who do not dare contradict the President in public, the two officials risked incurring his ire by openly questioning the wisdom of a shift to federalism.

The concerns they raised cannot be dismissed as speculative or baseless. They know where they speak from. Their expertise in the fields of economics and public finance is beyond question.

Their credibility is further enhanced by the fact they are not politicians nor have they been reported to have any political agenda to promote. And that means a lot in this highly politicized society of ours.

If keeping their jobs rather than living up to the mandate of their offices wereforemost in their minds, they could just have kept silent or, better still, publicly toed the line on the federalism issue.

Contrary to the suggestion of San Beda Graduate School of Law dean Fr. Ranhilio Aquino, a member of the committee that drafted the federal charter (and who claims to be all-knowing on the issue of federalism), they should not be dismissed from the service or ordered to keep their traps shut because they represent the voice of reason and discernment on the economic aspects of the proposed system change.

Between Aquino who has spent his life in a religious order that provides for his personal needs and Dominguez and Pernia who cut their teeth in the real world of business and finance, there is nodebate onwhoisworth believing on economic issues.

The alarm bells raised by Dominguez and Pernia should not be ignored by the lawmakers in case (knock on wood) they convene as a constituent assembly and the proposed federal charter is submitted to them for consideration.

Bear in mind the suggested system change is aimed at improving the lives of our countrymen by empowering local government leaders in the formulation and implementation of social and economic measures in their areas of governance.

The accomplishment of that objective depends to a large extent on the availability of funds that will finance the operations of the national government and local government units.

It’s good that Dominguez, who enjoys the President’s full trust and confidence that date back to their teen years, has come out to question the economic aspects of the proposed federal charter.

That should encourage a deeper and more meaningful discussion by all sectors on whether or not the system of governance that has been in place for more than seven decades should be changed.