The Axelrod Theory

The election season formally starts on Feb. 9 and here is where things stand.

Mar is stuck. He is heir to a still very popular President. In 2004 he topped the Senate race with 19 million votes, a record for any elected position in our history. He is considered honest, experienced and hard working. Yet, after an initial bump from P-Noy’s endorsement, he languishes in the polls with no visible momentum.

Grace Poe’s fate is hanging on her DQ cases. This has affected her focus, her funding and her poll numbers. Although Grace is ideologically closest to Mar, her supporters shifted to Binay not to him. They believe the Liberal Party is behind the DQ cases.

Duterte has shot out of the gate despite his wackiness, limited national exposure and money. He needs to upgrade his policy credentials, organization and funding to become a serious contender.

Binay has returned as the leading candidate even as the corruption cases pile against him and his family.

Questions:

1) Why is Mar’s campaign not gaining traction despite all the positives?

2) What accounts for Duterte’s emergence as a serious contender despite all his craziness?

3) What explains Binay’s renewed popularity?

For an answer to these questions we might look at what is happening in the U.S. where the Presidential elections are now in full swing. There are some similarities with our politics. Like P-Noy the Obama Administration is considered to be relatively successful. It brought back the economy from the worst economic recession since 1929. It ended the disastrous Bush forays into Iraq and Afghanistan. It passed a universal health care system. Yet despite these accomplishments some of the main contenders for President are the anti-thesis of everything Obama represents. On the Republican side, the leading candidates are Trump and Ted Cruz, two extremists who promise to undo all the Obama programs. In the Democratic Party, Bernie Saunders, a self-avowed “Socialist”, is seriously challenging Hillary Clinton for the nomination even as Mrs. Clinton vows to pursue many of Obama’s programs. Why are voters riling against the incumbent?

Davis Axelrod is the strategist who successfully engineered the 2008 presidential election of Obama, a neophyte, African-American, first term Senator. In a NY Times op-ed piece he explains the current developments in U.S. politics. His thesis: Candidates are defined by the incumbents (whatever their accomplishments) as much as they are by the candidates themselves. Voters look for leaders who possess traits not present in the current President. Thus they voted for the studious Obama because he contrasted with the impulsive Bush. Now they want Trump, the bombastic maverick, because he is the opposite of Obama, the thoughtful President.

We see the Axelrod theory in the Philippines. Cory, a homebody, replaced Marcos, the strongman. FVR a steadfast, military man succeeded Cory, the coup-prone housewife. Erap, the flamboyant actor, followed FVR, the disciplined West Pointer. GMA, the educated technocrat, came after Erap. PNoy, an honest man, followed GMA, a reported crook.

In essence, voters look for change in their leaders whatever the latters’ accomplishments. If one believes in this Axelrod theory, the key to the elections is to be what P-Noy is not or, more exactly, not to be what P-Noy is.

Grace Poe is a change from P-Noy in that she is associated with the image of her father, a larger than life Filipino.

Duterte is everything the President is not, crass, uninhibited, pointed, outrageous.

Binay is a man of humble beginnings who contrasts with the aristocratic backgrounds of both Mar and PNoy.

Now Mar has chosen to be in the image and likeness of the President. If you follow Axelrod, this decision to brand himself as P-Noy, version 2.0, is the exact opposite of what he should be doing and may explain his inability to gain traction. To get out of his rut he needs to stop positioning himself as the alter ego of the President and his Daang Matuwid. People are not interested in a hand-me-down, recycled ideology. Mar must be his own person, define himself on is own terms as a serious candidate with serious intentions.

Mar also needs to go negative on his principal opponent with his ads to burnish his image as a tough guy. With only 3 months left, that is the only way to generate the 5-10 point bump that will get him to within the statistical margin of error. It is not in his nature nor his upbringing to do so but now is not the time for political correctness. So no more subliminal messages and high-fiving  with Daniel Padilla, bro. Just take out the gloves and go for the jugular.

It may be a case of too little to late. But if Mar can get to within 5 percentage points of the leading contender with the LP machinery, the money and a little help from his friends and PICOS, he may just pull it off.

The Job Just Got Tougher

 

Mar’s “daang” to Malacanang just got narrower and less “matuwid” courtesy of the President’s veto of a P2000 monthly increase for over 2 million private pensioners. This comes at the back of the Administration’s refusal to lower income tax rates.

The President said the proposal would bankrupt the SSS by 2030 so, on the face of it, kudos to him for doing the fiscally proper thing despite the burden it now imposes on his political ward. Private pensioners account for roughly 4% of the voting population, they tend to go to the polls, and they have a large influence on how their families vote, so their electoral impact extends beyond this number. In a close race the pensioners could be the swing vote especially on this issue where they are likely to vote in unison.

The Liberal Party has only itself to blame for this fiasco. It controls the House so how could it have allowed this political bombshell to get to where it did knowing their Party Leader would veto it ? Either the “LP” legislators decided to go off on their own or, worse, they were unaware of Malacanang’s sentiments, whatever, it clearly indicates the LP leaders were not on the same page which, actually, is not surprising.

Mar dutifully supports the President’s position while suggesting an “alternative” is needed i.e. his team is still working on it.

The facts: The SSS P2000 monthly increase would mean an additional P56 billion in annual outlays which would turn a yearly SSS surplus of about P30-40 billion into a deficit of P16-26 billion, rising annually as the number of pensioners increase. The deficit would wipe out the SSS fund by 2030 putting at risk future pensioners while slowing down current SSS benefits like salary loans.

The higher pensions could be funded by some or all of the following: Improved SSS operations, a Government subsidy, a restructuring of the present pension plan or an increase in contributions from current members and/or their employers.

The SSS reportedly has P19.4 billion in loans more than 5 years overdue. In 2014, it had P13 billion in uncollected contributions from employers. In 2010, the SSS had 164,111 delinquent employers yet filed only around 1,200 cases. In these periods SSS management received multi-million peso bonuses. Go figure. One could privatize the SSS to make it more efficient but this would be a complicated process.

An annual budget subsidy is unlikely: It would mean higher taxes, a wider budget deficit or a re-allocation of funds from other vital sectors like health, education and infrastructure.

A restructuring of the pension scheme could include an extension of the retirement age limit. This has been implemented in other countries facing pension liability problems.

The last resort would be to increase annual contributions. Pensions are funded by a combination of employee and employer contributions. Presently private employees contribute 3.63% of their salary upto a maximum of P15,000. In contrast, Government employees contribute 9% of total income. Raising the contribution of private employees by either hiking the rate or raising the P15,000 ceiling would bump up the front end inflows but would mean higher payouts on retirement so long term this is a wash. It would also diminish current take home pay. A compromise is to scale the contribution rate and ceiling based on salary levels to ease the burden on the low income earners.

Private employers currently contribute 7.36% of salaries to SSS versus the 12% the Government contributes to GSIS. The SSS has said if private companies were to contribute at the Government rate, this would cover the proposed P2000 pension increase. Some smaller employers could drop out of the system even though the absolute increase would be modest for these companies. The burden would be mainly on the bigger companies who are currently doing very well.

To improve company participation, there should be a tightening on rules for contractual workers where SSS contributions are often not made.

Mar has enough problems without now having to contain the damage of a LP-induced, botched pension proposal. He could hold his breath and hope the issue gets lost in the next news cycle. The Opposition is unlikely to let this happen. Or he could offer a Solomonic plan: The SSS has said it can manage a P500 increase. The plan could be a combination of a gradual annual increase from this figure, improved SSS operations, a higher employer contribution rate phased over time to match pension increases; and a review of the whole pension scheme and employment policies.

Whatever, the affair leaves us with a picture of a Liberal Party stumbling at itself with no one at the helm. That cannot be good.