New Deal from oil E-VAT

Wednesday, July 16, 2008
Manila Times


BIG DEAL
By Dan Mariano
Gordon: New Deal from oil E-VAT


Rather than give handouts or lift the expanded value-added tax (E-VAT) on oil, Sen. Richard Gordon said, the government should launch a "new deal" similar to the package of programs US President Franklin D. Roosevelt adopted in the 1930s that cushioned the effects and eventually reversed the Great Depression.

If the Philippines is to overcome the crisis triggered by skyrocketing oil prices, Gordon said at the Kapihan sa Sulo media forum, "the government should pump-prime our economy." The wherewithal for this effort, he added, could come from the windfall collections of the EVAT on oil, which has thus far generated some P60 billion in additional revenues.

Some senators are agitating for either a suspension or a total lifting of the taxes levied on imported petroleum and its byproducts. Gordon, however, chooses not to jump into that populist bandwagon. Instead, he pointed out: "The removal of the E-VAT on oil will not solve the oil price crisis. It is merely a Band-Aid solution and does not solve the root of the problem."

Rather than remove the oil tax, Gordon said, "the government should prioritize where E-VAT money will be spent. It should show the people where the money was spent and be transparent."

Like many quarters, the senator feels that the handouts, which the Arroyo administration has been distributing to the poor, are a waste of precious state resources and have no lasting economic value. Moreover, he added, government dole merely reinforces "the attitude of mendicancy among our people, which we have had more than enough over the last four centuries or so."

It is this keen sense of history that evidently inspired Gordon to point out key lessons from the Roosevelt formula on how to respond to economic crisis.

On October 29, 1929—which later came to be known as Black Tuesday—the US stock market took an unprecedented plunge, triggering a global economic depression. Over the next five years, unemployment in the United States ballooned from four to 25 percent. Manufacturing output dropped by about 30 percent. Blue-collar workers turned into panhandlers overnight, while some businessmen literally took a dive from their skyscraper offices.

A "New Deal" was what Roose­­velt called a flurry of undertakings—including a massive civil works program—he launched soon after his election in1933 and on through 1938. FDR's goal: give relief to the poor, reform the financial system and revive the economy. By time World War II broke out, America had recovered its strength as a major industrial power, allowing it to lead the Allies to victory over the Axis powers.

At the Kapihan last Saturday, Gordon said the government could adopt an economic recovery strategy similar to FDR's New Deal. "This could be done by using proceeds from the E-VAT on oil to fund major infrastructure projects," said the former mayor who shepherded Olongapo out of the ravages of the Pinatubo eruption in 1991.

Aside from erecting much-needed civil works, he explained, an accelerated infrastructure program would create jobs. "It would reduce our unemployment rate and ensure that people will have the money to buy, at the very least, basic necessities."

Moreover, Gordon said, "these projects will empower Filipinos and give them a sense of dignity."

Where should the government—faced with myriad problems all crying out for attention—start?

As chairman of the Philippine National Red Cross, Gordon has developed a perspective of the national situation far more comprehensive than most other officials'. Leading the PNRC's disaster-response efforts in the wake of Typhoon Frank, the senator found himself in Panay, Negros Occidental, Romblon and Central Mindanao. He rattled off statistics and information about the calamity, a lot of which has escaped the attention of the media and, more important, the central government in Manila.

For instance, while much attention was focused on the ill-fated MV Princess of the Stars, Gordon said that an estimated P600-million worth of fishing vessels have sunk in the waters off Negros, Samar, Surigao and other provinces. "Those fishing fleets need to be rebuilt if we don't want the price of fish to go sky high, too, like oil and rice," Gordon said.

In what he called "the forgotten disaster" in Central Min­danao, huge swathes of Cotabato have remained under water weeks after Frank exited the country. Thick clumps of water hyacinth from the Liguasan Marsh continue to clog the area's waterways, threatening to destroy bridges and other civil works—bringing the local economy to a virtual standstill. "This is one area that desperately needs flood-mitigation projects," Gordon said.

In Iloilo and other parts of Panay, flashfloods and mudflows generated by the typhoon destroyed irrigation systems that covered 400,000 hectares of farmland. "If we want to restore the island's agricultural productivity, the government needs to repair and even expand the irrigation network damaged by Frank," Gordon said.

The way the senator sees it, if the E-VAT on oil is removed the government would not only lose the resources it needs to pick itself up from calamities like Typhoon Frank, but also the funds that could prime the economic pump with infrastructure and other job-creating programs.

Gordon is a rare politician. He is not afraid to defy popular causes, but instead presses for long-term solutions to national problems. That, in my book, is leadership.