FOR all but a few minutes of the discouraging five-plus years he has been in office, BS Aquino 3rd has led most people to suspect that he neither clearly understands nor cares that there is an important difference between the titles “President” and “Emperor.” Apparently the small degree of uncertainty bothered him, so he decided to clarify that he does not, in fact, give a damn by vetoing the proposed P2,000 per month increase in SSS pension payments.
The SSS system here in the Philippines is approximately modeled on the US Social Security program, and the experience of US politicians suggests that, if it is allowed under Philippine law, Aquino should withdraw his veto as quickly as possible, before the angry torch- and bolo-wielding mob reaches Malacañang. Meddling with social security at all is extremely perilous for any elected official, and rejecting a payout increase is suicidal.
Social security pensions are too small to live on in the first place, but the refusal to increase them comes across as a judgment that they are adequate, which the would-be beneficiaries naturally find very offensive. Thus, any politician with any sense of self-preservation at all knows it is simply not done. Politicians who have tried don’t just get beaten in the next election, they find themselves on the wrong end of an electoral vendetta, with anyone they support or have ever been supported by being thrown into the same unmarked grave by the voters.
There is always the possibility, however, that a rejection of a benefit increase, distasteful though it may be, has a legitimate economic justification. Let’s examine the one offered by the President in this case: According to him, increased benefits to 2.1 million current pensioners would raise the annual payout by the SSS system to P56 billion. With investment income only reaching P30 billion to P40 billion, that would leave a deficit of P16 billion to P26 billion a year, which would have to be made up from the SSS investment reserve fund. At that rate, Aquino said, the system would run out of money by 2029.
That an increase in payouts should be accompanied by a similar magnitude of increase in collections in one form or another is a reasonable observation, but the rest of Aquino’s argument is complete hogwash, because it assumes nothing will change in the 12-13-year time period he sees. For one thing, the perspective that the SSS account has to remain in a permanent state of surplus is a fallacy; so long as enough revenue flows in to keep the zero point at some comfortable distance in the future—it might suffice for the reserve to only cover five or six years instead of 12 or 13, as long as inflows from contributions and investment income are stable—it can safely operate at a deficit. True, it requires a much higher level of management, and perhaps Aquino’s unconscious realization that the current talent in his Administration is not even close to being up to the task is what gives him cold feet. But it can be done; the US Social Security system has operated that way for decades.
Aquino’s complaint also assumes that no new jobs—specifically, regular jobs held by SSS subscribers who contribute to the system—will be created. The fact that he even has the realization is an indictment of his own Administration’s job creation record; despite the much-heralded “demographic sweet spot” the country is now supposedly beginning to enjoy, a significant number of the jobs created under Aquino have been statistical padding—part-time jobs, contractual jobs, jobs in family enterprises, and others that boost employment statistics but add very little value to the economy, and specifically do not add much, if anything, to the SSS coffers. Hypothetically, each new contributing worker added should cover one new retiree (through a combination of the worker’s direct contributions and the investment income those contributions earn); ideally, the number of new contributors over time should exceed the number of new retirees, at least until the population ages out of the “sweet spot.”
Even if nothing else were done, the circumstances would eventually prove Aquino’s arguments wrong; they would be debunked much more quickly if more direct steps were taken to compensate for increased pension payouts. A bill in the Senate that would have provided the SSS more flexibility in adjusting contribution amounts was not passed—Aquino pointed this out as well—and it should have been, but by itself is not enough to justify rejecting the increased pensions. Even without a legislative measure, the SSS could adjust their investment program if necessary, perhaps opting for a somewhat more aggressive strategy for a period of time to build up reserves. Again, the objective doesn’t have to be a guaranteed, indefinite surplus, but simply to consistently hold off the deficit point.
If Aquino sacrificed his political capital for sound financial reasons that Congress overlooked, that might be admirable, but he has apparently committed political suicide—perhaps less for himself than his party’s candidates—for erroneous reasons, and the smug way in which he did so, waiting until the last day or so before the bill automatically lapsed into law before issuing his veto, makes him look not only like a fool, but a callous bastard.