Business World, 16 July 2014


The Filipino must be terribly disillusioned with President Aquino’s demeanor when he appeared on national TV in open defiance of the Supreme Court’s ruling that the Disbursement Acceleration Program (DAP) is unconstitutional.

Instead of acting presidential and upholding the Constitution, Mr. Aquino warned: “My message to the Supreme Court: We don’t want to get to a point where two co-equal branches of government would clash and where a third branch would have to mediate.”

How does one take this veiled threat? I interpret the “third branch” to mean Congress, in which case it might mean either impeachment for some Supreme Court justices or huge budget cuts for the Supreme Court’s budget, or both.

The first option calls for Congress to initiate impeachment proceedings against some SC justices. This is reminiscent of what President Aquino did to then Chief Justice Renato Corona. The other option is for Congress to cut to the bone the Supreme Court’s budget. Both will be disastrous and divisive.

Mr. Aquino is undermining the Supreme Court as an institution. In the face of this threat, the Chief Justice and the members of the Supreme Court should stand firm and defend their institution.

The President should respect the rule of law and promote harmony, not discord, among co-equal branches of government.

Imagine the unthinkable: the Supreme Court reverses its decision that the core of the DAP is unconstitutional. Should this happen, the consequence is total chaos: no one in government will take the government process seriously. Why spend time and effort planning for the budget when the Department of Budget and Management (DBM) can sequester what Congress has authorized for the agency as early as the second quarter of the year?

The budget process is a tedious one. It takes months for an agency to prepare the budget for submission to the DBM. After the budget is submitted to the DBM, it is submitted to the President for approval and goes through several iterations. After the President submits the budget to Congress, the agency head and his senior staff will have to defend the budget before both houses of Congress.

If the Supreme Court reverses its decision and upholds the DAP concept — where appropriations authorized by Congress are arbitrarily sequestered by the DBM as early as the first quarter, declared as “savings,” and used to fund programs, activities and projects not authorized in the general appropriations act — then nobody will take budget preparation seriously.

The argument that the DAP has significantly contributed to economic growth is also rubbish. First, the need to accelerate spending because of implementation delays is self-inflicted. Had the Aquino administration prepared the 2011 budget well and its Cabinet was more competent, then there should have been no delays in project implementation.

Second, DAP disbursements in relation to total economy are limited. The DAP disbursements of P82.5 billion in the fourth quarter of 2011 may have contributed, at best, to some 0.11% to economic growth of 3.7%. Its full year contribution is 0.03%. I say at best because some of the disbursements have little impact on growth. For example, the P10 billion equity contribution to the Bangko Sentral ng Pilipinas has not resulted in a single new job. By the way, an additional P20 billion subsidy was given to BSP as part of DAP 2012.

The above analysis assumes that the DAP disbursement is new money — that is, additional aggregate spending.

Third, DAP disbursements, having being derived from savings, are not new money. Since the money used to fund DAP projects were taken from “savings,” this suggests that no new money was used. And since no new disbursements were made, there has been no increase in aggregate demand, and thus zero fiscal stimulating effect.

These are trying times. The tripartite system of government — the Executive, Congress and Judiciary — and the system of checks and balance are being threatened. The President, through the DAP, has been found usurping the congressional power of the purse. In his speech on Monday, the President has openly defied the Supreme Court’s ruling on the DAP, disrespecting the Supreme Court’s power of the pen.

In the face of these attempts by the President to extend and expand his executive powers, the Filipino people should be eternally vigilant.