What do we stand for?

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Este post está disponible en español.

Venezuela’s National Assembly, our playhouse of populist political theater, sometimes – once in a blue moon – has to actually legislate.

One of the issues currently being debated is a Reform of the Nourishment Law. But in the heat of the debate, like in a badly-edited Hollywood action flick, it’s hard to tell who the good guys are.

I can’t really tell you what the Nourishment Law does. I can, however, tell you what it doesn’t do, and that is provide food for every single Venezuelan. Not even the government can make that claim and keep a straight face.

Regardless, they are debating a change in the law to force the government and private businesses to provide their employees with the famous cesta-tiques. (These are a little bit like Food Stamps, except they’re issued by employers, which sometimes includes the government.) Gradually, Venezuelan workers have come to see them as the Holy Grail of Entitlements.

So it’s a technical point about who should get what, right? So far, so boring.

As it turns out, the government wants to exclude retirees from the new benefits, while the opposition is planning to march to the National Assembly demanding they be included, too.

Venezuela can hardly afford what amounts to a new tax on private business and a massive new entitlement program for its public sector, not when it’s still barely coming out of a recession, inflation is out of control, and we’re deep in the red. But the opposition is insistent on one-upping the government and demand that this latest rash of fiscal insanity be spread to even more people, some of them far from critically poor. They are apparently upset at the government…for not spending more of the money it doesn’t have.

Venezuela has deep budgetary problems. At a time when oil is sky high, we’re issuing debt like there’s no tomorrow just to keep spending apace. We need to take one hard look at our medium- and long-term sustainability in order to restore sanity to our finances.

But the problem is that these discussions don’t take place. Rather like the Chipotle example in Jonathan Chait’s excellent TNR blog post, we have isolated discussions on the budget, with each side arguing for more piecemeal spending and nobody asking the right questions, with no one serious enough to look at the big picture. Nobody, that is, except Miguel.

It’s at times like these that I wonder what we stand for. Do we stand for fiscally sound policies that help those who need it most? Do we stand for targeted, responsible social programs?

Or have we simply bought into the notion that there is no such thing as too much demagoguery?

1 COMMENT

  1. Juan and I had a nice, cross-fire style Fight about this post over Skype last night – que no se diga que en CaracasChron opera una mononeurona!

    From the right – Juan Cristobal who doesn’t want pensioners to eat! From the left – Quico who never seems to think government is quite big enough!

    I’m very satisfied at the resulting post. It’s still mostly Juan’s, but I feel my concerns are adequately addressed in that graf pointing to Chait’s TNR blog post.

    My main reaction, though, is that it’s not actually possible to judge whether the opposition’s stance on Cestatiques for Pensioners is fiscally responsible or not simply because half the spending the government does (or is it 30%? or 60%? see, we don’t even know that!) is off-budget. So the Cestatiques entitlement expansion may or may not be fiscally responsible, and the real outrage is that we can’t tell.

    Juan seems to think it’s insane to add new spending commitments when you’re already facing a big deficit – by definition, whatever the news spending is, we can’t afford it.

  2. It’s adding a blanket cost to all businesses, that is actually indexed to the increasing price of food. Heck, even food producers will have higher costs because of this.

    Together with the anti-firing laws, this will just translate to less employment, less expansion, and more business closures, which spirals right back to less supply, and greater inflation.

    The matter about whether it’s within budget or out of budget reach, is irrelevant, really. It’s just bad for the economy, whether we can afford it or not. Think of it this way, are competing companies that don’t have these costs at an advantage or disadvantage against those that do have these costs? Nobrainer much.

    • Oh, I don’t think it’s irrelevant at all. One could make the case that giving food aid to pensioners is somehow good public policy – but if you’re issuing billions of dollars in bonds just to keep afloat, you can’t afford it!

      • Maybe it’s semantics, but how can it be considered good public policy if it’s bad for the economy, especially if there are more efficient alternatives that less vulnerable to mismanagement and abuse?

  3. That is the traditional model, see who can offer more to give away. I have yet to even see a calculation (except for mine 🙂 http://devilsexcrement.com/2011/01/30/venezuelan-social-security-pensions-can-the-country-afford-them/) on whether Venezuela can afford to pay minimum salary pension to all those eligible in this unfunded pension plan call el Seguro Social. And if it is possible, for how long can the country run its pension system from its budget without funding it??

    Just the fact that I am eligible shows how screwed up the system is and, my wife, because she is a woman, has been eligible for four years. So, now we may be eligible for cesta tickets too!

    If my very rough estimate is close to being correct, Venezuela next year needs 10 billion to pay debt and close to 8 billion to pay pensioners, that’s 18 billion right there and you have to pay salaries, etc. Just think, the budget is 47 billion dollars. Thirty left…

    • Thanks Miguel, I hadn’t read your article. I’m going to add a link to the post.

      I’m glad to see you’re also in the camp of those who don’t want “los viejitos” to eat.

      • Muérganos! Deslmados! Neoliberales! Barrigaverdes!

        Let’s get real. Chávez is spending billions and billions of dollars on military hardware whose only imaginable role is as target practice for a NATO mission down the road. Pre-fabricated debris.

        And we’re going to balance the budget on the back of grandpa’s lunch…really?!?? REALLY??!

        This is madness. There are probably 8000 crazier, less defensible spending programs than this one in Venezuela.

        Entonces, you start at the beginning. With the *genuinely* crazy spending – the gas subsidy, the electric subsidy, the foreign aid, the Sukhois, the overpriced, made-for-forex-arbitrage bond issues. Billions and billions spent with no conceivable public policy rationale.

        Cut that!

        When you’re done, come back and we can talk about cestatiques for old folks…

        • But Quico, we’re not talking about what spending to “cut”, the discussion is what spending to add! It’s a tad different.

          Yes, there are crazier spending programs in the Venezuelan budget. It doens’t mean that we can afford a new one. We simply can’t.

        • Quico, I don’t think anyone is defending the way money is being spent by chavez… 😀 Had I known that was the choice, I’d be pulling the cestatique wagon.

    • Wait, wait, so out of the two comically overdrawn, strawman versions of our arguments, you find more bureaucracy more plop-worthy than starving viejitos!? Really?!

      • As a matter of fact I do. And this is nothing to do with starving viejitos. Juan said it best:

        But Quico, we’re not talking about what spending to “cut”, the discussion is what spending to add! It’s a tad different.

  4. I think you are forgetting one little fact: we are already on campaign for the coming elections. The opposition – especially the left parties inside it – need some kind of social cause that will help them with lower income class, the seniors and everyone with the right to vote.

    And of course it is insane to propose such thing as cestatickets for everybody: not only it will overload the national budget, but also hurt the private sector.

    In the end, I think it would be more reasonable to propose a raise in the pension, but one that should be financed entirely by the government. Where can that money come from? Just shut down all that money that is given away to Cuba, ALBA and cancel – when possible – all the military contracts that have been signed with Russia and the other so-called friends of the revolution. Who needs those weapons anyway?

    That should be probably the line that the opposition should be repeating everyday, every hour til the day of the election… Less money pa la revolución, mo’ money para el pueblo!

    • I would support expanding the pension program to include all citizens, and being an equal and raised amount: unconditional cash distribution.

      • Wait, wait … but you’re proposing doing that while at the same time reducing government bureaucracy!

        That’s the thing – a coherent proposal to re-shape where we spend the money and re-allocate spending from here to there is an interesting debate. But that’s not the debate we’re having! The one we’re having is A saying we should spend X more, and B saying we should spend 2X more.

        • Well, you know my stance, regarding the cestatique, it’s a no. You also know my stance regarding government spending as little as possible and no more than necessary, so 2X is a no, too, assuming X is already more than necessary. You may not know that I’m against governments taking out loans or churning out financial instruments simply because I believe governments should be able to stay within budget and budget should only be covered by taxation, so issuing bonds is a no.

          That leaves natural resources revenues, which you pointed out are beyond this debate, yet I was replying to A. Barreda’s mention of the opposition’s need for “some kind of social cause that will help them with lower income class, the seniors and everyone with the right to vote.” A cash distribution of these would certainly address that kind of social cause.

          • 3,000,000 x $100 = $300,000,000

            $300,000,000 / 27,000,000 = $11.11

            $11.11 x 10 BsF/$ = 100 BsF

            If Venezuela produced and EXPORTED 3 MM BPD and sold it for $100, and distributed that to each and every Venezuelan, that would come to 100 BsF per pueblito, which they could likely use to support a decent life. To feed, clothe and educate themselves.

            BUT, Venezuela is exporting a lot less, and after operating expenses realizes a lot less. And if it all went to the pueblito as an equal distribution there would be nothing left for anything else.

            Sure taxes would help, but not in an economy still on the downslide where private businesses are on their last gasp.

            And who ever thought that setting up eternal entitlements was a good idea? Economists? No. Only the pueblito and politicians who were sure to get re-elected, assuming there are “honest” elections.

          • Risking a second slap on my hand, I’ll just ask:

            Why do you think the taxes would be so low if the people would be spending $300,000,000 per day in the market?

          • No slap intended. I am only pointing out, IMO, that the math doesn’t work very well. I’ve read your comments on equal distribution with interest. I just don’t see it working in general, it is unsustainable in the long run, and does not encouraging a society to grow beyond being reliant on the government for handouts.

            The results of being under the thumb of CH in Venezuela can be seen now, imagine it being worse.. You want to eat, how did you vote? Did you go to your communal meetings this month?

          • Lazarus,

            Follow the money through its cycle and you’ll see that the government will not be short of money at all.

            Before anything else, let’s imagine a scenario in which Venezuela has zero natural resource revenue. The government would be forced to live off of taxes. In an ideal world, Venezuela’s government should have a budget within those limits and should live within said budget for all the nation’s needs. So, it’s not unreasonable to push for a long term plan for the nation that imposes such limits on the government.

            To the above, we then add the natural resource revenue. The choice, then, would be

            A) the government spends the money,

            B) the people spend the money.

            If A, the theory is, and has been, the government will spend it towards improving the nation, and the benefits of those improvements will targetedly or indirectly reach the people. This has failed throughout Venezuela’s past.

            If B, the theory is, the people will spend it towards improving their own lives, which means on goods and services provided by others. That amount of money being spent on the market daily, based on consumer spending should reactivate (like never before) the market that you point out is gasping for air. That spending implies that the market will present profits (like never before) to the taxman. Those tax returns imply that the government will be collecting enourmous amounts in taxes (like never before).

            So, contrasting the two cycles, we see that cycle A offers promise, but no guarantee that everyone benefits, let alone evenly, while cycle B guarantees everyone benefits evenly. Note that in cycle B the government still gets to spend a huge amount above the “no natural resources” scenario. Also note that what it has to spend on no longer includes anything in the “helping people below the poverty line” bucket.

            If you agree with the phrase “no such thing as a free lunch”, you must realize, it’s still the same total amount of money flowing through the system, just that in cycle B it is being forced through each citizen, as opposed to just hoping it trickles down to them or gets handed out to them in a targetted fashion (with the drawbacks of that mentioned in the post). Also, consider that big government projects in Venezuela almost invariably lead to money leaving the country, many goods and services being provided by foreign providers. In cycle B, people will be spending most of the money on local providers, even if on imported products.

            So, it’s not about numbers. The numbers don’t change. It’s about flow order and centralization. It’s about empowering people with the natural resources revenue instead of empowering the government, though the government gets a considerable boost through taxation, as it should be.

        • I find that argument unconvincing, after all I could simply say I’m also ADDING spending to the budget, I’m just adding a NEGATIVE number… you know Algebra 101 (Let’s spend -25X on those Sukhois).

          It’s perfectly valid to say let’s cut X to spend it on Y. Why do you find that out of line?

  5. I’m with the Opposition on this one.

    I’d say: If we are elected, we’d do things entirely differently, and we’ll be cutting some things, too. But we won’t agree to exclude seniors from a hunger programme just because aid to Cuba and Sukhois are “off the table.”

    In general, a social programme should not differentiate based only on absence of an sufficient funds to put it into effect. If that is the case, reduce the benefit for all eligible recipients. “We don’t recognize your hunger because you are old” is a discriminatory principle based on age.

  6. Forgetting about my politics view, which tends to thinks that this is just more big government and intervention in a dreadful economy. Could it be just a political strategy where opposition parties are trying to send a message like: “Government does not want to help the seniors, we do” but, in the matter of fact they do not want it either?

    Being honest about political processes in the AN, it is almost impossible that a bill sponsored by MUD could win a vote. So, they know that, and they will claim that the social policies of PSUV are a failure and they don’t want the well being of senior citizens. And the end, in an eventual opposition-lead AN they would say something “we wanted to help people but mmm we just bought a calculator and we realized that we cannot pay for it!”

  7. Helping the poor by providing unsustainable benefits, is not really helping anybody.

    Blaming capitalism for every ill, and then ruining perfectly productive enterprises and destroying stable jobs is madness.

    I think it is all part of a type of megalomania. But this type of megalomania seems to be socially transmitted!

    • “Helping the poor by providing unsustainable benefits, is not really helping anybody.”

      Exactly. If the government IS overdrawn every single budget, and the government IS also the National Banker, with no incentives to be responsible. Even with the best of intentions What do you get? Inflation, devaluations, instability, growth in liquidity, loss of confidence. Ordinary people on salaries become impoverished. No longer independent. Everything you might (ostensibly) have sought with your irresponsible policies goes down the drain.

  8. While I don’t know the precise answer, I am not so sure that those receiving pensions are “poor”. To get the pension you had to have a “formal” job for a period of roughly twenty years (750 cotizaciones) and if you are a man you have to be sixty and if you are a woman 55. These are not exactly the “poor” in Venezuela. I would bet they are mostly class B,C and D but very few are the very poor. Thus, we are not even talking about helping those in most need as far as I can see.

  9. Those receiving a pension are not poor. They’re poor because all they’re receiving is a pension, which barely covers the cost of their meds, Went to the pharmacy this afternoon to get meds for my parents — BsF1,684.42 — and this only covers about 2 1/2 weeks.

    JC, you said: “But Quico, we’re not talking about what spending to “cut”, the discussion is what spending to add! It’s a tad different.” Well, I don’t think you can really separate the two. Because in the current Venezuelan situation you can only talk about what spending to add if you also talk about what spending to cut, And there seems to be plenty of places where spending can be cut or completely eliminated.

    • 🙂 ok, and i agree that at some point in life everyone deserves to retire from “fishing”…but if NO ONE in the country fishes, then what happens?? In addition, one could stock the deep freeze with fish from one’s fishing years, thereby having fish for years afterwards…ok, stupid metaphore, i’ll stop now, cheers fred

  10. I think we stand for winning elections / removing Chavez from power. If you think about it, what is more fiscally responsible?

    1. Spending $8 Billion we don’t have to increase our chances of winning in 2012, or
    2. Being a fiscally responsible, out-of-power opposition who has to watch Chavismo do as it pleases with the Country’s finances for another 6 years.

    I’m pretty sure option 1 is way cheaper.

    • I am totally with you on this one Pixar. JC yelled at me (methaphorically of course) in the spanish discussion of this post but I stand by my idea.

      Actually I think this looks like someone is finally thinking on terms or “electoral marketing” in the opposition. This is one of the few “social” programs that has not been created by this goverment, they cancelled almost everything else that existed before. Also, it is not branded as a “Mission” and viejitos still don’t have to wear a red shirt to cash their pensions. So it makes total sense that the opposition is choosing that as a battleground.

      One of the messages where Chavez has been unchallenged is in the “caring for the poor” area and the oppossition has had a big problem convincing poor people that they would actually care for them as much or more than him.

      This is also one of the laws that was proposed during the campaign. Did you vote for the opposition deputies? They said in advance these would be the laws, so in a way you voted for this. They are focusing in a few things with lots of impact in people’s lives.

      It puts the goverment in a corner:
      – Do they refuse a benefit to the “pueblo”?
      – If they approve it where are they going to find the money? From the arms budget? or are they going to go out and try to get more debt to cover it? Are they going to find it?

      So, if we win the election, then we will have the discussion of how to balance the budget. And I bet the pensions are not the first thing we will be looking at.

      • It doesn’t have to be programs that were not created by this government. Actually, as far as “electoral marketing” it may be better to target some of the programs created by this government. A lot of the poor, including a high percentage of chavistas rely on them and they’re not providing the services they were designed for. The Programa de Alimentación Escolar (PAE) (created by this government???) does not seem to be working properly. Money had been allocated to it (in a no transparent way) and then things don’t get done (http://www.aporrealos.com/forum/viewtopic.php?t=44768 — and like this there’re always complaints from chavistas on how things are being run). If the opposition takes one of these programs and makes it work (additional funding may not even be required,maybe just good accounting on how the funds are spent), it may win a lot of chavista votes that are having doubts on how the government is treating el pueblo.

        • Well, then why stop at $8 billion? Why not propose spending $80 billion? Or $800 billion? Why not simply promise that we will make every Venezuelan a millionaire? I mean, if we’re gonna treat the Venezuelan electorate like idiots in order to get their votes, then let’s go all the way, right?

          What could possibly go wrong?

          • I mean, if we’re gonna treat the Venezuelan electorate like idiots in order to get their votes, then let’s go all the way, right?

            What could possibly go wrong?

            Nothing, it’ll work every damn time.

          • Because figuring out ways to save $8 billion is 10 times easier than saving $80 billion.

            If your priorities are different than the government’s you could potentially find ways of affording this while at the same time improving your chances of actually being an electable political force.

            My point here is that in the short run anything is more fiscally responsible than another 6 years of Chavez.

          • I hear you, we should not lie. But when you’re selling a product of many features, you can easily focus your marketing on the features that will get the consumer to purchase your product, and avoid mentioning the features you’ll have to leave out.

            Or better yet, you could come up with a breakthrough product that is so much more efficient than the previous version that it truly does everything: unconditional cash distribution. 😉

    • Sure, but then comes The Shock when everything does not turn as rosy as it was made to be. And then The Return of Hugo Chavez.

  11. Dear friends.-
    For your information ¡
    Donation to Cuba.-
    100.000 barrels a day of oil given to Cuba @ 100 US$ = 10.000.000 US$ per day.
    10.000.000 US$ per day X 30 days = 300.000.000,00 US$ per month.
    300.000.000 US$ X 5.30 Bs tasa SITME = 1.590.000.000,00 Bs.
    Pensionados IVSS.-
    1.722.000 pensionados X 418 Bs Monto min. mensual = 719.796.000,00 Bs. (1)(2)
    1.722.000 pensionados X 836 Bs Monto max. mensual = 1.439.592.000,00 Bs.
    Leftover per month in Bs to cover some extras (Zelaya´s salary, Daniel´s drinking habits,etc.)
    1.590.000.000,00 Bs minus 719.796.000,00 Bs. = 870.204.000,00 Bs . (164 millions US$).
    1.590.000.000,00 Bs minus 1.439.592.000,00 Bs = 150.408.000,00 Bs. (28 millions US$)
    (1) Numero de pensionados al 25/02/2011
    (2) Considerando que en febrero de 2011 la Unidad Tributaria quedó establecida en 76 bolívares fuertes, a partir del momento en que fue publicado en Gaceta Oficial (25/02/2011), el rango de los Cesta Tickets de acuerdo a la Ley de Alimentacion, art. 5, queda de la siguiente forma:
    Monto mínimo Cesta Ticket (25%): Bs. 19,00 por dia o 418 Bs x mes (22 dias)
    Monto máximo Cesta Ticket (50%): Bs. 38,00 por dia o 836 Bs x mes
    Regards,
    Un viejito ex – yuppie and PDVSA retired.

  12. Mike: I tried to vote twice for your comment, that is a large part of the problem. Even among the better to do, there is a lot of “the Government will provide” attitude.

    There are many, many places to cut, gasoline, the military (eliminate it!), privatize all of those companies that suck up money and produce losses, change retirement age to 65 for all (aren’t men and women equal under the Constitution?), no aid to any country but Haiti.

    But, is anyone talking about these?

    • ty MO…while i lived in caracas that was what i observed…and the further away from the big cities i went the more pronounced this attitude seemed to get. I am a socialist (but a canadian one) and the main difference is that i believe everyone deserves the same opportunity to achieve whatever level of success they desire…what they do with that opportunity is another matter, and the consequences are on their own head, good or bad.

  13. This entire discussion and debate in the AN is a canard. It simply continues the same old politics in which parties woo the voters with more promises of more goodies.

    Forgotten is the real problem: Properly managed, in a country such as Venezuela, domestically produced food would be cheap and available to all. We should be eliminating obstacles to production, not creating new ones. Everyone wants a piece of the pie, but nobody is baking new ones. Will we finally kill each other to determine who gets the last few crumbs? Pathetic…

    • Quoting from Octavio:
      There are many, many places to cut,
      (1) gasoline,
      (2) the military (eliminate it!),
      (3) privatize all of those companies that suck up money and produce losses,
      (4) change retirement age to 65 for all (aren’t men and women equal under the Constitution?),
      (5) no aid to any country but Haiti.

      Let me add:
      (6) Reverse the brain-drain
      (7) Bring back investment
      (8) Reduce Imports and Increase Exports in beef, coffee, sugar, etc.

      Let’s add to the list and calculate the savings!

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