LEGAZPI CITY -- A top Arroyo economic adviser said yesterday that President Gloria Macapagal Arroyo has approved the proposed P75 billion economic package to cushion the impact of the rising threats of the United States’ recession and the rise in prices of global commodities that would affect the country’s economy.

        Albay Gov. Joey Sarte Salceda, one of the president’s economic advisers, said the economic package would enhance social investments in the form of income tax deductions, electricity discounts and accelerated agriculture and infrastructure spending.

        The economic package drawn-up by Salceda was presented and subsequently approved on Tuesday at a Cabinet meeting held in Malacañang.

        In a press statement circulated to media yesterday, Salceda said the P75 billion package includes economic stimuli that would give P24 billion worth of incentives by way of tax tariff relief to middle class earners and reduction in electricity rates to households consuming 200kw hr/month.

        Another incentive is the P51 billion investment expenditures in agricultural productivity, food for school, education, health, housing and infrastructure.

        Salceda said “my proposal is for the president to make a policy-mix combining the individual income tax reduction and electricity tariff rebates of P24 billion and increased spending of P51 billion. This way it would preserve growth momentum without wrecking the tax base for long-term growth.”

        He said the economic package would cushion the impact of the US recession and the lingering effects of spikes in global commodity prices.

        In the US, cash is the best form of relief and the first best policy option in this situation would have been income tax rebates being unbiased and efficient instrument of stimulus, but in the Philippines it has only 1 million individual income taxpayers and they are mostly rich and middle class.

        Income tax relief targeted to middle class working families is inevitably the only fundamentally feasible ingredient of any stimulus menu, he averred.

        Reducing electricity tariffs is another viable policy options, a P1.5/kwhr special discount on top of existing lifeline rates is proposed only for households consuming 200kwhr/month, this translates to a P300 savings monthly on electric bills for the poor and lower middle class families.

        Policy makers should reassess the timeliness of a balanced budget in 2008 as a socially desirable national goal, “a balanced budget translates to surplus in the entire public sector, posting a P56 billion last year,” Salceda said.

        He likened the US recession as a storm signal already raised; the Philippines can not just fidget and watch it coming out for fear of backlash from credit markets, saying further “we must implement the economic equivalent of pre-emptive evacuation which has been proven to achieve zero casualty during economic disasters.

        “The principal threat posed by a US recession to RP is loss of momentum which would negatively impact our revenue base if we do nothing,” he said

        The economic stimulus would preserve the country’s growth momentum and the best use of these resources from a fiscal surplus is to invest them in protective shield against US recession.

        Salceda also batted for the retention of the Value Added Tax (VAT) on oil products as the move to lift the VAT on oil “could just open the gates to exuberant populism under the gathering clouds of global pessimism.”

        “The economy is better off and the poor is better served by properly spending VAT proceeds on well-targeted social spending programs,” he explained.