Involuntary Push towards Poverty and Mal-development

 

by the Freedom from Debt Coalition (FDC)

 

Section 26(B), Book VI of the 1987 Revised Administrative Code as instituted by Executive Order (EO) 292 says that:

                Automatic Appropriations. — All expenditures for … (b) principal and interest                             on public debt, … are automatically appropriated.    

It was during the Martial Law in the Philippines that automatic appropriation for debt service was first codified, in Section 31(B) of Presidential Decree 1177 (Budget Reform Decree of 1977 ). In consonance with her “honor-all-debts” policy, Aquino signed into law the Administrative Code of 1987, copying en toto Section 31(B) of PD1177 into Section 26(B) of the code. Section 31(B) of PD1177 also serves as its legal basis.

Automatic appropriation for debt, on top of other automatic appropriations, severely compromise the Congressional “power of the purse“ since only a little amount of the budget is left for Congressional reallocation as Congress cannot increase the budgetary ceiling (Article VI, Section 25-1 of the 1987 Constitution, as affirmed by Sec. 24, Book VI of EO292). The level of borrowings too, is effectively set by the amount of principal amortization to debts which are to be “rolled over”, since they are not part of the budget but instead deducted to new “financing” of the government.

 

Origins of the Automatic Appropriation

It is interesting to note that the US government also had an experience with an automatic appropriations law on debt service, but this was during a war. It was in 1847, during the Mexican War , that the US Congress for the first time altered the practice of appropriating specific amounts of money for each expense it authorized. Instead it empowered the Treasury to pay all interest and principal on the national debt as it came due, regardless of the amount paid out. This creates the first “automatic” appropriation legislation – authorizing the Treasury to pay the debt as it became due without obtaining specific congressional approval [Krishnakumar, 2005].

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