Budget approval process at a standstill

The FUSADES economic proposal

Social illnesses or individual pathologies?

News Briefs

BUDGET APPROVAL PROCESS AT A STANDSTILL 

The process whereby the national budget for fiscal year 1999 is to be approved is bogged down in the Legislative Assembly where the Assembly's Treasury Commission has been passing it back and forth for some months now without being able to arrive at a final agreement. The three fundamental problems which have apparently slowed down budget approval are: the increase in the fiscal deficit, some oversized categories which are not amenable to logical explanation and some apparent contradictions with the Constitution of the Republic. To this may be added a fourth difficulty: a proposal to cover fiscal deficit for 1999 by issuing bonds. With the budget approval process at loggerheads, the government, however, has not ceased to function, given that the government has spent much more during these months than during the same time period during 1998 —i. e., the government is operating as if the budget had already been approved.

ARENA could —if it so wished— approve the budget in the exact same form in which it was presented by the Treasury Ministry to the Legislative Assembly because it has the votes necessary to carry such a measure. But, for reasons not altogether clear, the effort has been to push through approval unanimously. Some unconfirmed versions insist that ARENA is not in agreement with the proposed budget presented by the Ministry of the Treasury; but instead of facing the consequences, it prefers a scenario in which it is the FMLN which gives battle and wears itself out. If the first part of the affirmation were true, then both parties would have been able to negotiate the budget without stridency and it would have been approved some time ago. The situation would be different if ARENA did not have an alternative to the project presented by its Ministry. Be that as it may, the spectacle of the deputies mutually accepting guilt for something which is primarily the responsibility of the executive office —and this, without offering any credible explanation or viable alternative— can only be described as lamentable.

The person principally responsible for the national budget is the Minister of the Treasury who has presented an inconsistent and deficient budgetary proposal and —if this were not enough— has moved onto an old battleground by placing an additional item on the agenda as well: the public debate on the dolarization of the country. In reality, responsibility for the stagnation of the budget proposal can be laid at the door of the Treasury Ministry because had he presented a well-thought-out proposal, and if the content had been consistent and if the Treasury Commission had offered more collaboration, the discussions of the deputies would have been more fluid and, perhaps, the country would by now have had a 1999 budget. To discuss dolarization in this context is to divert attention from the discussion of the fiscal deficit —the dolarization proposal being a new quasi-magical remedy for the country's economic ills.

Perverse is the adjective which might be used to describe the maneuvers set in motion by the Ministry of the Treasury together with the ARENA party on the question of budget approval. There is, perhaps, no other way of describing the efforts by both (magnified by an uncritical press) to attribute the fiscal deficit to the Judicial Branch of government. True it is that the judicial branch has increased its budget, but it is equally true that the fiscal deficit is being provoked by still other causes not yet fully clarified. Pointing the finger at the increase in the judicial branch was a diversionary tactic employed by ARENA and its minister. It may be the way that this state organ spends its budget is very much open to question, but the same may be said for the other two and all of the governmental institutions which make it up.

The governmental entities do not plan their budgets with even a minimum of rigor. Austerity and saving are processes unknown to them. On the contrary, they tend to inflate their costs, which, once approved, are spent to the last cent without paying any attention at all to who they belong to or what the need is. The inevitable result is wastefulness. All of this is possible because, in spite of repeated promises of transparency, the government offers no information on public spending in spite of the existence of an Office for the Modernization of the State; this office concerns itself exclusively with the spending of public funds and because (in spite of the discourse on efficiency and competition) the government does not evaluate its functioning. The president and his ministers present reports to the Assembly in the form of a more or less lengthy laundry list —and a very boring one, at that— of what they have done during the year but without the least effort at evaluating its administration. But neither do the deputies ask for a rendering of accounts. Until now, ARENA governments have administered public resources during the past ten years with a politically unacceptable liberality which is open to condemnation from an ethical point of view.

A country with such a scarcity of public resources and with the enormous social problems which El Salvador has ought to be more careful in the administration of public affairs. The stagnation in the process of budget approval for 1999 is proof of the failure at modernization of the state encouraged as much by ARENA as by private enterprise. The short-sightedness of this vision —i.e., the equation of modernization with privatization of public goods— has dangerously limited its possibilities. In practice, neither of the two has been able to present a coherent plan for the modernization of a very inefficient and very expensive public administration.

The deputies and the political parties, however, must also assume some of the responsibility for the problem because they have not made an effort to approve the budget; nor have they spent the time or energy sufficient to deal with this very complicated matter, apart from the fact that they do not even have the information necessary, which would normally be supplied by the Calderón Sol administration —nor the advice of the appropriate experts. The delay in approving the budget presupposes a loss of time, money and opportunity. The lack of capacity exhibited by the Calderón Sol administration and the politicians are costing the country while everyone declares should be developed and so return to prosperity.

The repeated notices to the different ministries and even to President Calderón Sol for the Legislative Assembly to approve the budget quickly fall on deaf ears because neither the Ministry of the Treasury nor the ARENA deputies respond in an agile manner. As a result, the projects which the ministers declare have been retained for lack of funds can be interpreted only as propaganda, in response to which public opinion responds with indifference. The government and the deputies continue to wrap themselves up in a discussion which appears to lead nowhere while the year 2000 and its new budget fast approaches.

THE FUSADES ECONOMIC PROPOSAL 

For a decade now the proposals presented by the Salvadoran Foundation for Economic and Social Development (FUSADES, for its initials in Spanish) have attempted to influence new governments in favor of an economic policy which promotes development. In fact, that institution notably influenced the drawing up of the policies of the first ARENA government, which adopted, without much thought, measures such as the reprivatization of the bank, the liberalization of prices, etc. The FUSADES proposals did not enjoy much influence during the Calderón Sol administration, but there were many similarities between then and the policy followed by this government on the question of privatization of basic services and the pension system.

Recently, and only two months before the inauguration of the third ARENA government administration, a new proposal for economic policies drawn up by FUSADES was made public: to keep inflation low, implement a sane fiscal policy, establish an exchange rate that does not penalize exports while keeping interests rates stable.

For the moment, President-elect Francisco Flores has indicated that he has his own government plan and that the FUSADES proposals will not necessarily be a part of it, although they "will be studied". The presidential initiative called "The New Alliance" does not have the same technical content that the FUSADES proposal does: it differs from it in that it explicitly considers the need to implement measures which might improve the conditions of life of the most needy part of the population, while the second proposal centers on the implementation of measures for economic policy and especially fiscal policy, which it is to be supposed will contribute towards slowly satisfying the basic needs of the population by means of greater growth rates.

Along the following lines the principal proposals of the FUSADES proposal will be examined with respect to fiscal policy, the taking into account possible implications of the measures concerning the least favored sectors of the country's population. Specifically, the effects of measures such as the freezing of minimum pensions will be examined, along with income tax reforms, the elimination of the diesel subsidy (as well as the taxes on diesel) and liquid gas as well as the elimination of value added (IVA) exemptions on basic grains, fruits, vegetables and milk.

Although it is to be accepted that various measures proposed by FUSADES which would contribute to reducing the fiscal deficit, one cannot help but point out that, the majority will have heavy implications on the increase in prices, the lowering of workers' real salaries or real income and the tax increase for low income sectors. And so the proposal to freeze minimum pensions would imply condemning all pensioners to subsist permanently with pension levels which are already insufficient to acquire the basic food basket, with the aggravating factor that the measure would be accompanied by the imposition of greater obstacles to retirement such as: increasing the minimum age for retirement and the requirement of a minimum number of years of contribution as a prerequisite for retirement.

The most important reforms on income tax proposed by FUSADES are: a reduction of the non-taxable minimum, the elimination of the limit on tax exemptions for corporate entities, the elimination on the deductions for health and education expenses, the introduction of taxes on interests paid by businesses for new credits, the elimination of the accelerated depreciation of investments and the setting of a limit on deductions for donations. These measures affect salaried sectors as well as business owners because, while the first two would provoke an increase in the tax base of the low income contributors and the very small and small businesses, the others would also affect big businesses and high income contributors.

The proposal to eliminate the subsidies on diesel and liquid gas will also have negative implications for the population given that they would increase the cost of the basic food basket. The elimination of the diesel subsidy presupposes more pressures on the increase on public transportation rates. This topic, of course, on several occasions has been the subject of heated polemics between the passenger transportation guilds and the corresponding authorities on the question of their effects on consumers. Additionally, they would also increase transportation costs for merchandisers who will surely increase their rates for service and this will be passed on to the consumer in a generalized increase in the prices of products. Along this same line, the imposition of taxes on the sale of diesel would presuppose —among other implications— pressures to increase bus rates for public transportation, on prices for hauling freight, which would also impact the family economy in that it would increase the costs of cooking food.

The elimination of IVA tax exemptions on basic grains, milk and medicine is also an inflationary measure because it would imply that the price to the consumer of these products would increase by 13%, corresponding to the current rate of the value added tax (IVA). This would evidently provoke more pressure on the increase of prices.

The background of the policies proposed by FUSADES is, fundamentally, the public finance equilibrium. The importance assigned to the measures directed at the financial sector, the stock market and the level of profits is greater than that assigned to fiscal policy measures. Growth in production, jobs, income and the satisfaction of the basic needs of the population appear, then, to depend on the elimination of some subsidies and exemptions which, although they are directly aimed at favoring sectors with lower income, it would appear that they would obstruct the way to growth, stability, the creation of jobs and the reduction of poverty.

The truth is that the program which is proposed, although it is more coherent and consistent than the economic content of "The New Alliance", suffers from at least one intrinsic contradiction: how to prevent a situation in which fiscal policy measures become an attack on the objectives of reducing inflation and fighting poverty. Especially because the program proposes measures which would elevate the prices of basic goods which would, in turn, provoke increases in the inflationary rhythm, in the cost of the basic food basket and in poverty (public transportation, liquid gas, basic grains, fruits, vegetables, etc.).

In summary, the FUSADES proposal does not represent a viable economic option because, even though it would increase growth rates, it would be doing so at the cost of greater taxes for the sectors with the lowest incomes and it would increase the cost of the basic food basket. The reality of poverty in the country requires proposals which do not make the burden fall on the shoulders of the poorest sectors and which, quite to the contrary, would contemplate the need to obtain the greater part of the required resources from the sectors with the greatest income.

SOCIAL ILLNESSES OR INDIVIDUAL PATHOLOGIES? 

The current debate on the problem of violence passes necessarily through a form of classification. It is already well known that in order clearly to understand the phenomenon it is advisable to differentiate political violence from violence in the family, for example. In this way social analysts have established a series of ways in which violent conduct tends to manifest itself. This discussion touches El Salvador directly as it disputes first place with Colombia for the country with the highest levels of violence. The last two decades of Salvadoran history have been marked by two forms of exteriorized violence: political violence and criminal violence. If, during the 1980´s the national scene was determined by the conflict occurring during that decade, the 1990´s have been marked by problems of public security.

This is the thesis of investigations on the question of violence in the country and policies which, for good or ill, are implemented —or which an effort is made to implement— to arrest such violence. The idea seems to be that once the conflict of the war was over, the new enemy which must be fought —on the question of violence— is delinquency. This is indeed true, but only relatively so. That to struggle to find ways of minimalizing criminality ought to be a priority for social scientists and governmental functionaries is something which could be doubted only with some difficulty. The problem is that the emphasis has been placed on the phenomenon of crime and delinquency has left to one side the interest and treatment of other manifestations of violence which are of equal or greater importance.

We refer here to the violence in the family, in the first place. But in this scheme of things one cannot ignore consideration of at least two kinds of violence: street violence, to which anyone who leaves his or her house is vulnerable (stray bullets, traffic accidents); and other violence characteristic of prisons, to which anyone who is interned in a penal center for whatever reasons is exposed. Sad news of mothers who murder or torture, step fathers or other pederasts in the family, children affected for life by stray bullets, deaths caused by traffic accidents, deaths, torture and rape between prisoners appear with alarming frequency in the news media and in casual conversations among acquaintances.

What is worrisome here, beyond the acts themselves, is the handling of them by public opinion and the authorities. Each time a minor is a victim of abuse or an innocent person is run over by an irresponsible driver, the act is immediately particularized. Details of what occurred, photos, names of those involved are quickly in the press, radio or television in order to underline the fact that it was a specific person who suffered a situation which is also very specific. It is easy to isolate one case form another in order to contribute to the firming up of the idea that only some luckless and unfortunate people were involved in such tragedies.

To declare that a deliberately established policy to make these cases appear to be isolated tragedies would be out of line. What is not so out of line is to indicate which groups upon which the greatest part of the responsibility for handling these "secondary" modes of violence should fall and which appear sufficiently convenient to particularize them.

In the first place, there is the government, always concerned to sell El Salvador as the most prosperous country in Central America. We recall with what difficulty Calderón Sol recognized that crime was one of the most serious problems in the country; even today the measures adopted to confront it make us doubt how sensitive this administration is about how deeply affected the population is.

To accept the fact that violence in the family and other kinds of violence, which in serious treatments of the phenomenon are continually laid aside, are far from being particular cases, along with crime, social problems, would imply: on the one hand, to chalk up one more point against the utopian vision of El Salvador which the current president would like to transmit; and, on the other, to accept that one more serious problem needing resolution exists.

In second place, there is civil society. To begin to observe the pathological conduct of families, the psychopathic way in which the customs which make up the modus vivendi in the persons as behavior which responds to social patterns would bring with it the obligation to begin to accept that we live in a sick society. And this is something which not many of us are willing to recognize. If it is the society which is sick, then it is the case that all of us participate in some minor or major way in that sickness. It is no longer a question of certain perturbed, drug addict or alcoholic persons out there making victims out of others who happen to get in their way as a result of bad luck. It is as much a question of the acts of these "perturbed" persons as it is of the damage which they cause to their victims; all have a quota of responsibility.

Centuries ago, societies were in the habit of committing to special centers those individuals whose conduct did not allow them to relate to others in a "normal" way. In determinate circumstances the need to take some kind of measure is not open to discussion. But in a society such as Salvadoran society where more than one individual with "abnormal" conduct is arrested on a daily basis, it is more and more difficult to continue thinking of violent acts as individual problems or questions. What are the characteristics of our society which contribute to causing such aberrant and irresponsible conduct? It is a question that we ought to begin to pose to ourselves before thinking of the death penalty or other coercive measures aimed at controlling the destructive impulses of "sick people".

It is more than well known that the psychological antecedents of a pederast is that he has been abused himself during his childhood , in the same way in which parents who torture tend to have been tortured themselves during their childhood. When these pathologies degenerate into atrocities such as the impulse of a mother to murder her child, it is clear that this mother suffers from mental problems. But do there not exist, perchance, social conditions which create potential pathology? Would imprisonment be the correct way to deal with her sickness? Surely a goodly part of Salvadorans would say yes to this last question. What is so easily lost from sight is that violence is an ascending spiral in the dynamic in which we all participate in some way or other.

A mistreated child will, only with difficulty, not become a person who mistreats others. If in this person's adult life specific conduct leads him or her to prison, what real possibilities will he or she have for reinsertion into society? Is it not more possible that such behavior would possibly lead to death? So then, if cases such as this mark the life of a still undetermined, but doubtless scandalous number of families, are we not speaking of a sick society more than isolated sick people whom it is necessary to marginalize? To avoid this fact is more convenient for the good health of the collective conscience and the political intentions of the party in power, but would such an attitude not be, in the long run —is it not already— counterproductive?

BONDS. Deputies for the ARENA, PCN, PDC and PLD parties voted to support the issuance of 225 million dollars in bonds with which the 1999 budget will be financed. The 47 votes became the first concrete step for the approval of the project for state spending presented by the Legislative Assembly seven months ago. Gerson Martínez of the FMLN declared that his party did not support the approval, considering that it violated the spirit of the Constitution, "given that originally it was 2,189 million colones in bonds and they are approving 36 million over and above that and the real use of these funds is unknown". With the legislative decree the President of the Republic is empowered, through the Ministry of the Treasury, to initiate negotiations for the bonds which will permit, according to the text of the law approved, "the supplementation of the current savings in order to cover the diverse commitments of the government." For now, the ratification which would permit the issuance of the bonds must be awaited. This can be achieved with the votes of the qualified majority —that is to say, with the votes of 56 of 84 deputies (La Prensa Gráfica, April 16, p. 4).

CODES. On April 20 1998, or, one year ago, the reform to the Penal Codes and Procedural Penal Codes entered into effect. This year five functionaries of the justice system presented, on April 19, the official results of the application of these codes and their reforms. The representatives of the Coordinating Commission of the Justice System, in which, paradoxically, Public Security authorities are not included, concluded that the results were positive. The Commission is made up by the President of the Supreme Court, the Attorney General, the Minister of Justice, the resident of the National Council of the Judicature and the General Ombudsman. The president of the Supreme Court, Eduardo Tenorio, holds the firm conviction that the perception of the justice system is mistaken when it is said that it does not function. He added that the application of the procedural norms has succeeded in improving it with more agility, efficiency in the handling of each case, institutional coordination and accessibility of the citizenry to the justice system. Although the evaluation made by the Commission made them feel "satisfied with the effort", implemented from the point of view of the application of the reforms, there also exist differences between their members. The Attorney General, Manuel Cordova Castellanos, said, concerning the matter, that "sometimes there are differences, but what is important is that everyone speak the same language" on the question of the fight against crime (La Prensa Gráfica, April 20, p. 4).

REFORMS. President Armando Calderón Sol and police authorities do no have the same evaluation of the official results of the application of the penal codes as the functionaries of the justice system who evaluate these same results as "satisfactory". On the contrary, they have asked the Legislative Assembly to reform the Codes. "The have been presenting reforms...They have been in effect for one year and it is necessary to evaluate how they have been applied. In this sense, we hold the opinion that it is necessary to implement a series of reforms", stated Calderón Sol. At the same time, he lamented that the said modifications have been held up in the Assembly. "There has been no political willingness to approve these reforms nor to confront the problem of delinquency, nor of the security of citizens", he added. The legislation has been harshly criticized by leaders of Public Security and the National Civilian Police, who consider it "favorable to criminals". The director of the National Civilian Police, Rodrigo Avila, holds that crime increased when the new penal norms entered into effect because they limited police work. He added that 40% of crimes committed are a result of the benefits which the law provides. The National Association for Private Enterprise (ANEP) has taken up the attack on the reforms because it attributes the increase in crime to the application of this legislation (El Diario de Hoy, April 20, p. 2).