Opinion FILIPINO PENSIONER HORACE TEMPLO
Contribution and pension adjustment formulas THE Social Security Act defines the amount of pension as the sum of P300 and the product of 2 percent of a member’s average monthly salary credit and his credited years of service. Seemingly simple, it becomes complicated to a member as soon as he starts computing his AMSC and CYS, and applies to the resulting pension amount the guaranteed minimum provision. The charter defines only the initial amount, and while it mandates the review and adjustment of pensions at least once every 4 years, it leaves out the exact date and amount of adjustment. The pension adjustment provision is so vague it had consequently divided us as a nation on whether or not SSS should grant the now controversial P2,000 pension increase that former Representative Neri Colmenares proposed, Congress approved, but President Benigno Aquino III vetoed upon the advice of officials of the Social Security System. Must government subsidize it or should workers and employers pay for it via additional contributions? Pension professionals describe the SSS pension system as “defined-benefit,” which links weakly one’s pension amount to his actual contributions. Consequently, some pensioners receive more than they had given, while others less. The Government Service Insurance System, the military, police, judiciary, and Constitutional bodies also administer DB pension schemes with varying degrees of contribution sharing. We seem comfortable with this type of pension. For instance, after we debated hotly the merits and demerits of the conditional cash transfer program to needy families and the P500 social pensions to indigent senior citizens, we eventually settled down and made them the centerpieces of our non-contributory public welfare programs where beneficiaries receive tax-funded benefits without having contributed anything. In contrast, the scheme is called “defined-contribution” if an individual’s pension benefit is equated to his actual contributions and their earned investment income. DC schemes include those of Pag-IBIG and similar provident funds of public and private institutions. Their members receive at retirement the exact equivalent of what they had contributed plus their investment earnings—no more, no less. Participants of DC schemes know that they cannot demand benefit amounts that exceed what they had contributed. Unlike them, SSS pensioners get back much more than what they had contributed. To illustrate, those who had contributed P84 a month for 10 years would have paid a total of only P10,080, yet they are entitled to a monthly pension of P1,200. No matter how wisely their contributions had been invested, their accumulated value would never be enough to pay for even a year’s pensions. Obviously, active members now pay for their pensions. It’s true that the SSA man-
dates the adjustment of pensions, but only if the actuarial soundness of the reserves remained guaranteed and the same contribution rate were kept. It only allows pension adjustments if there are surplus funds in the reserves that are no longer needed. SSS used to have such surplus funds when it granted 22 pension increases from 1980 to 2014, but not anymore as disclosed consistently by its responsible officials. Thus, in plain and simple language, SSS officials could no longer adjust pensions even if they had already stagnated. But pensions—like wages— should be periodically adjusted for inflation. The question is, how should it be funded? Increasing the contribution rate is the most obvious way. It is more preferred over increasing the maximum salary subject to contributions, which also raises future pension obligations. Certainly, other events— sometimes, not even catastrophic—could occur and threaten the soundness of the pension reserves. Even a stable economy could create a regime of low investment returns, and the loss in projected investment income would have to be compensated by a higher contribution rate. The steady improvement in pensioners’ longevit y— especially if accompanied by declining rates in birth and labor force part ic i p a t io n — could also increase pension liabilities. We must also consider the unfunded liabilities that were created by the recent increase to P40,000 of funeral benefits and the acceleration of coverage of highly-subsidized, low-income informal sector workers. Unintentionally, perhaps, they were launched without prior actuarial studies. Nonetheless, they had added pressure to increase the rate of contribution and the cash flows of revenues and benefit payments would soon show this even without implementing any pension increase. At the extreme side, a catastrophic event such as war or a worldwide economic crisis could wipe out SSS investments and force establishments to close down and lay off workers. Consequently, contribution collections and member loan repayments would drop considerably while benefit claims would soar. Beyond doubt, they could only be mitigated by increasing contribution rate, which is the universal way of responding to them. Yet the Social Security Act lacks in its provisions detailed formulas on how to adjust the contribution rate, pension amount, and other funding requirements. It’s therefore high time that these formulas be incorporated into it. SSS would celebrate its 60th anniversary on Sept. 1, 2017 and members and pensioners would expect to hear from President Digong Duterte’s appointed officials that they had accomplished so much. But what would they tell them if these enabling amendments haven’t been legislated by then—empty promises of undoable pension increases, again?
Must government subsidize it or should workers and employers pay for it via additional contributions?
FRIDAY, DECEMBER 30, 2016
A5
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Scalia’s legacy on the US Supreme Court By Noah Feldman IF THERE were to be a legal man of the year for 2016, it would have to be Antonin Scalia. The justice died in February and has cast a long shadow over the whole year. His seat remains unfilled. His jurisprudence seems likely to be the touchstone for Donald Trump’s nominee. Indeed, if Trump gets two or more Supreme Court picks, Scalia’s judicial legacy stands a chance of being vindicated rather than forgotten—which seemed almost unthinkable when he died. Scalia’s legacy is therefore poised to set the tone for future constitutional battles in a way not seen since the 1935 death of Oliver Wendell Holmes, another great dissenter. When Scalia died, many commentators, myself included, noted that his originalist constitutional legacy consisted mostly of dissents. (His textualist statutory interpretation legacy was another matter. There Scalia wrote plenty of majority opinions and significantly influenced even liberal justices.) At the time, Scalia’s passing also appeared to herald the end to originalism as a dominant constitutional doctrine. With nearly a year to go in the presidency of Barack Obama, it was assumed that Scalia would be replaced by a liberal or at least a moderate justice. The appointment would change the balance of the court to decisively liberal for the first time in more than a generation.
And if Hillary Clinton had been elected, as polls suggested she probably would be, the liberal court could have been assured for a generation to come with the replacement of as many as three more justices, all of Scalia’s approximate age. What a difference 10 months can make. By blocking Judge Merrick Garland, the Republican Senate changed the rules of the confirmation game. The election of Trump means that Scalia will almost certainly be replaced by a justice who espouses some form of his originalism—and probably cites him as a judicial model, in the way Trump has done and probably all the judges on Trump’s list would. And if one or more of Justices Ruth Bader Ginsburg, Anthony Kennedy or Stephen Breyer steps down while Trump is president and Republicans control the Senate, the generational transition on the court may be toward greater conservatism, not liberalism or stasis. The consequences for Scalia’s legacy are enormous. Great judicial dissenters don’t just write to make a historical record of their beliefs. They hope for their dissenting opinions to be redeemed by later judicial majorities, to use a term coined by the legal scholar Richard Primus in a seminal 1998 article. One of Primus’s examples of a redeemed dissent is that of Justice John Marshall Harlan (the first of two justices of the name) in the repulsive case of Plessy v. Ferguson, which held that the equal
protection clause wasn’t violated by the doctrine of “separate but equal” facilities for whites and blacks. Harlan wrote: “In view of the Constitution, in the eye of the law, there is in this country no superior, dominant, ruling class of citizens. There is no caste here. Our Constitution is color-blind, and neither knows nor tolerates classes among citizens.” The other greatest redeemed dissenter in the US constitutional tradition is Holmes. He saw his “clear and present danger” test for free speech vindicated, despite articulating it partly in dissent. And his dissent in Lochner v. New York, where he objected to the majority’s use of the liberty of contract to strike down a progressive law limiting bakers’ working hours, eventually became a basic principle of liberal jurisprudence. Several of Scalia’s dissents now stand a real chance of being redeemed. Scalia argued repeatedly over the years that there was no fundamental constitutional right to an abortion. His dissent in Planned Parenthood v. Casey, to take one example, asked rhetorically whether abortion was a “liberty protected by the Constitution of the United States” and answered bluntly that “I am sure it is not.” Scalia explained that he reached that conclusion “because of two simple facts: (1) the Constitution says absolutely nothing about it, and (2) the longstanding traditions of American society have permitted it to be legally proscribed.” In the Casey dissent, Scalia
also pointed to his concurrence in Webster v. Reproductive Health Services, in which he wrote that Justice Sandra Day O’Connor’s “assertion that a ‘fundamental rule of judicial restraint’ requires us to avoid reconsidering Roe, cannot be taken seriously.” On affirmative action, Scalia used Harlan’s color-blindness ideal to argue that racial preferences would violate the Constitution. He wrote: “To pursue the concept of racial entitlement— even for the most admirable and benign of purposes—is to reinforce and preserve for future mischief the way of thinking that produced race slavery, race privilege and race hatred. In the eyes of government, we are just one race here. It is American.” Scalia’s most impassioned dissents came in connection with gay rights. It still seems unlikely that the court’s landmark decisions on the rights to gay sex and gay marriage will be overturned, given the court’s history of rights expansion. But it isn’t entirely unthinkable on a court dominated by Trump appointees chosen in the mold of Scalia. Liberals lionized Holmes in his old age, and after his death they redeemed his opinions within a couple of decades. Scalia’s redemption may come faster. Whether it does will depend on Trump’s appointments to the court. Regardless, the jurisprudential battles of the next decade are likely to continue to be fought on Scalia’s terms. That in itself is a surprising victory.
Bloomberg
The free-market case for climate science By Paul J. Ferraro ARE you someone who has faith in the power of free markets? Then you should naturally accept the evidence that human activity is bringing about climate change. Free and competitive markets work efficiently in large part because they are phenomenal information aggregators, gathering and sorting facts about consumer preferences and business production costs, and guiding market participants to engage in actions that provide benefits to both sides. Markets can easily help figure out the most efficient way to deliver coffee to people’s homes, for example, or to reduce air pollution in cities. Markets also determine which ideas succeed (the iPhone, for instance) and which ones fail (Kool Kardashian Kard). Likewise, scientific ideas thrive or perish in a marketplace of their own. Whereas participants in an economic market are rewarded for delivering goods or services well, participants in the marketplace of scientific ideas get rewarded for overturning conventional thinking. This is because the scientific method works not by proving theories but by disproving them: Scientists
A moment... From A4 had contributed 72 percent of total SMC sales revenues (63 percent in 2016). No other company in the Philippines, and perhaps in Asia, has done so massive a transformation in so short a time as has San Miguel. SMC’s infrastructure business, conducted through San Miguel Holdings Corp. (SMHC), consists of toll roads South Luzon Expressway (SLEX), Skyway Stage 1 and 2, the Southern Tagalog Arterial Road (STAR) and the Tarlac-Pangasinan-La Union Toll Expressway (TPLEX) and the just completed NAIA Expressway (NAIAx) and the ongoing Skyway Stage 3. SMC operates Boracay Airport which has a new 1.8-km runway. It will build the Mass Rail Transit Line 7 (MRT-7), with a highway below it, to Bulacan. Today, SMC is No. 1 beer, food, packaging, petroleum refining and marketing, power generation, and tollways. It is moving aggressively into mass transport, airports, coal, cement, hotels, resort and island development, even while expanding
The... From A4 “anonymous Christians”, and it is in that vein that the Church honors their martyrdom. But this blooddrenched day in the calendar of the Church is the narrative explication of what John so succinctly says of
pose and test rival explanations, and ultimately, the concepts that are disproven fall away while those that aren’t prevail. I myself have made a career of introducing such rival explanations in the field of environmental science. I’ve shown, for example, that the Endangered Species Act, when not accompanied by funding to help with species recovery, may put species in greater danger, not less. I’ve shown that the environmental and social impacts of national parks and reserves are much more modest than their proponents and opponents claim. And I’ve described how attempts to conserve water by improving the efficiency of irrigation may in fact increase water use. In short, like most scientists, I am rewarded when I disconfirm, not when I confirm, a way of thinking. Like any other market, the market for scientific ideas has imperfections and frictions, but it is characterized by competition and by free entry and exit —hallmarks of the idealized free market described in any introductory economics textbook. It’s true that incumbent scientists, like incumbent businesses in all markets, try to set up barriers to new competitors. Review panels of incumbents vet new
ideas for academic journals and government research funding. But in time such barriers are surmounted. Like those perfect markets in economics textbooks, scientific markets never leave “cash on the table”—they don’t leave good ideas unexploited, not for long. Eventually those ideas spread widely. After more than 25 years, the idea that human activity has led to greater greenhouse-gas emissions and, thus, greater climate change has won out over competing theories to explain how the Earth’s climate system operates. Over time, the number of rival explanations has declined, rather than increased. And refinements to the dominant theory have strengthened, rather than weakened, the case for it. At a meeting I recently attended, the chairman of a university’s department of Earth and planetary sciences announced that he would no longer hire scholars in climate science because “the science is done.” While important measurements and observations will continue, the theoretical questions at the frontier have been answered. There’s reason to think the evidence for human-caused climate change is prevailing in the econom-
ic marketplace, as well: Property insurers and other profit-maximizing businesses with a substantial financial stake in the concept are taking actions that demonstrate they believe the evidence. They are working to create more accurate models of climate change and to price climate risk into insurance programs, even threatening lawsuits against actors who do not try to limit ongoing climate change. As we say in economics, revealed preferences are more convincing than stated ones. Fundamentally, the concept of human-caused climate change has won out because alternative views—including arguments that the theory is a hoax spread by anti-growth and anti-technology Jeremiahs—contradict what competitive markets are demonstrating. In the end, then, it is inconsistent to simultaneously accept that markets are powerful ways to allocate goods and services in the economy and also deny that human activity is causing substantial climate change. There’s room to argue over the economic implications of climate change or the best ways to mitigate and adapt to it, but the scientific consensus is no longer a matter of debate. Bloomberg
frenetically its core businesses— beer, food, packaging which are also market leaders. SMC’s businesses have combined EBITDA value of P1,051 billion (P1 trillion), over five times the company’s stock market value. This is the dictum of the individual parts being more valuable than the parts combined. Beer and Ginebra are worth P307 billion, Food P116 billion, Packaging P46 billion, Power P124 billion, Fuel and Oil P317 billion, and Infra P141 billion. And since then, the country’s premier conglomerates have followed in RSA’s footsteps. Ayala also went into infra and power, as did the so-called MVP Group of Manuel V. Pangilinan, the PLDT CEO. George Ty of Metrobank also saw potential in power generation and has aggressively built up his portfolio of power plants. “The best is yet to come,” smiles SMC president Ang. In 2015, SMC retained its position as the Philippines’ largest company in revenues with sales of P677.773 billion, down 13% from 2014 due to the decline in oil prices. Profits remained steady though at P28.993 billion, almost the same as 2014’s P28.57 billion. On a con-
solidated basis, SMC reported a net income in 2015 of P38.2 billion, 26% higher than in 2014. EBITDA reached P108.6 billion, 23% higher. The topline 2015 numbers, say Ang and Chairman Eduardo Cojuangco Jr. “offer a snapshot of how our company did in 2015. They, however, do not reflect the level of achievement we have attained in terms of priming the company for long-term growth.” “Our performance in 2015 illustrates how our company is better built to derive income from multiple revenue streams and make structural adjustments to maximize opportunities offered by the business environment,” said ECJ and RSA in their 2015 annual report to stockholders. Indeed, in 2016, SMC was on track to chalk up profits of P51 billion, a seven-year high, and revenues of more than P700 billion. Overcoming initial confusion about SMC’s frenetic moves, investors have begun to appreciate the strategic moves of Ramon Ang. From a 12-month low of P47.50 per share in December 2015, SMC shares have steadily risen, to a peak of P101.6 on Dec. 15, 2016, thus doubling the company’s market capitalization to P241 billion before
stabilizing at P220 billion at this writing. The rise in market cap is a tribute to SMC’s strong performance in the first nine months of 2016. Operating income reached P73.2 billion, up 23%. Business showed double digit operating income growth rates— beer 19%, Ginebra 65%, Food 25%, packaging 12%, Petron 23%, power 18%. Infra showed 7% growth in operating income. SMC’s P20 billion proposed bond issuance was given PRS Aaa, with a stable outlook. SMC earned its triple A because of: (1) Ample cash flow generation that is seen to strengthen further as the company’s energy and infrastructure projects are completed; (2) Manageable and improving debt position, especially considering the capital-intensive nature of its recent projects in energy and infrastructure; (3) Adequate liquidity and financial flexibility; (4) Solid market position and substantial track record of its subsidiaries, backed by stable demand and boosted by an improving economy; (5) Seasoned management team with sound strategies.
the Word-become-flesh: “He came unto his own, and his own received him not”. It was because of Herod’s psychotic fear of the “Newborn King of the Jews” that he had the innocents slaughtered. Herod, the king of the Jews, did not want the newborn king of the Jews alive! The martyrdom of the innocents
prophesied the martyrdom Jesus himself was to suffer, because, and that which many of his disciples would suffer become his kingdom is not of this world! For all the glitz and the glitter, the cheer of Christmas carols and the endless feasts and treats, the greetings many times heartfelt, but
sometimes, regrettably trite, Christmas is for the thoughtful—as it is a call to prayerful thankfulness for the difference it has made to human history, and to my life and yours!
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