Riding the TRAIN

While consumer prices are set to spiral upward at the start of the year, our navel-gazing lawmakers are busy dreaming up ways to extend their terms beyond 2019.

They probably think their job is done, having passed the 2018 national budget on time, and leaving Malacañang to handle the fallout from the Tax Reform for Acceleration and Inclusion or TRAIN Law.

Malacañang is belatedly seeing the impact of imposing a hefty tax on petroleum products, particularly gasoline and diesel, the fuel of most mass transportation vehicles, and coal, used extensively for power generation.

The government has embarked on a pathetic attempt to delay the tsunami of price hikes resulting from the fuel excise tax under TRAIN. The inevitable consequence is that the year is opening with demands for fare and wage hikes, and the consequent price increases in everything from electricity to food.

Yesterday the news was that meat prices would also go up as a result of higher cold storage, power and logistics expenses. Perhaps next Christmas, there will be shorter lines for lechon manok – a favored noche Buena entrée in lower income households.

Whatever savings people will enjoy from the income tax cut will be lost to inflation. Many of those who are now exempted from paying income tax belong to the informal workforce and don’t pay income tax in the first place, so they will feel the pain of higher consumer prices all around.

Everything is going to be more expensive, from the most basic – rent, food, utilities, fares – to non-essentials that make life more bearable for certain people, such as fashionable clothing and facials.

* * * What did Malacañang expect? Previous administrations subsidized fuel prices. It took political will to finally deregulate the industry. The current administration went a step further and slapped a hefty tax on fuel. It could make Philippine power costs the highest in Asia, hands down.

There was opposition to the fuel tax, but the House super majority aimed to please – not the people, but Malacañang.

People are looking for someone to blame and vent their ire. It’s not going to be Finance Secretary Sonny Dominguez, the guy behind TRAIN, whose job is to squeeze as much revenue as he can from every source possible.

It’s not going to be the House of Representatives, from which all tax measures emanate, or the Senate whose concurrence was needed for the consolidated revenue bill, although leaders of both chambers could be singled out come election season.

Blame will fall squarely on the guy who signed the TRAIN Law, President Duterte.

He’ll also reap the praise, in case TRAIN delivers on its promise of inclusive growth through tax reforms and better infrastructure. But the promised benefits are still some years away.

Scrambling for damage control in the short-term, the government is reportedly set to launch an information campaign to pitch the virtues of TRAIN. It’s a challenging mission, especially with people looking for someone to blame for their shrinking purchasing power.

A key reason for TRAIN, people are told, is to raise enough revenue to finance the “Build Build Build” infrastructure program of the administration. This is a sound explanation, except people will weigh the projected longterm benefits against the immediate impact.

The government is hobbled by a disappointing track record in implementing big-ticket infrastructure projects, a number of which never got off the ground thanks to corruption scandals, inaction and sheer inefficiency.

People generally acknowledge the inadequacy of the country’s infrastructure and recognize the need to raise funds to address this problem. But there are also concerns that whatever is built will be costly to use for ordinary folks. The few new roads added to the inadequate network in Metro Manila and nearby areas in recent years have toll rates that discourage their use, even if driving time is drastically cut. Just look at those roads and flyovers during rush hour, and look at the regular roads at ground level, and you’ll see what I mean.

Paying hundreds daily in road toll is a fortune for ordinary motorists. Even access to infrastructure is not inclusive in this country. So the administration cannot expect much enthusiasm among the masses for Build Build Build.

It’s also unfortunate that lawmakers are openly bickering over allocations in the 2018 budget for earmarking infrastructure projects for funding, with opposition members complaining that their constituents will get nothing. If TRAIN revenues will finance the latest incarnation of the congressional pork barrel – plus the foreign junkets that lawmakers insist they cannot do without – the tax reform law could be headed for a train wreck.

Economists are seeing higher GDP growth this year as a result of greater spending for infrastructure. But growth in this country has not been accompanied by inclusion. The rich simply get richer, the poor poorer, and those in between continue to leave in droves for jobs overseas.

In pitching TRAIN, this is the basic problem of the administration: higher prices are happening now – or at least starting in at least two weeks – while Build Build Build is still in the distant, uncertain future.

* * * After the passage of TRAIN, lawmakers are now busy with the shift to federalism through Charter change.

If President Duterte seriously believes federalism is the answer to the nation’s woes, he should redirect the energies of his congressional allies in their effort to sell the idea to the nation.

Speaker Pantaleon Alvarez has just inadvertently thrown the worst monkey wrench into the federalism sales pitch, by floating the possibility of a term extension for himself and the other lawmakers, through “no-el” or no midterm elections next year for Cha-cha.

In the recent past, the need to lift economic restrictions and make the Philippines more competitive as an investment destination made Cha-cha palatable even to its opponents. Former president Noynoy Aquino also found support in his call for curbs, through Cha-cha, on what he described as “judicial overreach.”

Rewriting the Constitution to shift to federalism, however, is another story. Based on what proponents have presented so far, they have to persuade skeptics that the change in the form of government will not simply institutionalize feudalism and further entrench political dynasties and warlords.

Now they have added the specter of term extensions to that scary prospect. Combined with rising prices, it’s a recipe for protracted unrest.