If we needed any more support for the argument that the government needs to reduce taxes, the first-quarter economic numbers supply the reasons.
The consensus estimates were that the gross domestic product would grow by 6.6 percent over the same period in 2014. Moody’s was even more optimistic with a 7.3-percent forecast. Instead, the government reported on Thursday that the economy grew by 5.2 percent. In other words, the growth was more than 20 percent below expectations.
It is even worse when you consider that this quarter was being compared to a low base from 2014, and the government said the problem last year was Supertyphoon Yolanda. This year the problem is the government.
The leaders of a corporation that missed revenue or profit numbers by 20 percent would be considered a management failure.
Looking at the internals of the economic activity for the first three months of the year shows that the private sector is doing a good job. Industry posted a growth of 5.5 percent, better than the 5.4 percent recorded last year. Manufacturing was up by 5.9 percent. Consumers spent 5.4 percent more. Private-sector construction was a large 14.2 percent higher, and investments in capital goods grew by over 14 percent, both increasing capital formation by 11.8 percent. The service sector remained strong, up 5.6 percent.
However, government construction spending dropped by 24 percent.
Aside from basic public services, the government has only one job when it comes to its fiscal policies. It is supposed to provide infrastructure: roads, airports, publicly owned transportation, dams and schools.
The government’s excuse that it encountered “spending bottlenecks” is ridiculous and insulting. In a good government, spending for infrastructure is supposed to be preplanned and ongoing. Apparently, after nearly five years on the job, the people running the spending programs have not figured out on to keep a steady supply of projects in the pipeline without using the “pork barrel.”
Here is the good news. Without the government, the private sector was able to increase the size of the economy by 5.2 percent. That is a successful accomplishment. Imagine how much more it could do if it could keep more of its own money. The government collected 18 percent more in taxes and revenues equal to P408 billion in the first quarter.
Economic Planning Secretary Arsenio M. Balisacan said that the economy must grow by an average 7.5 percent for the rest of the year to achieve the government target of a 7-percent to 8-percent growth. He said that this is “not impossible.”
Here is a suggestion to make that growth target less impossible. Reduce taxes, and let the private sector grow the economy and create jobs and prosperity, while the government figures out how to properly spend our money.