Reality as a Holographic Projection

The Holographic Principle states that the everyday reality that we experience (including you and me) is a projection from somewhere else, i.e. the boundary of the universe. The 'projector' (similar to "R2D2's projector in the picture above) is a two dimensional surface where everything exists. The projections (like Princess Leia's hologram above) is in three-dimensions. In a sense, we are really two-dimensional pixels living on that distant surface who are projected in three-dimensions.

Strange as this may seem, physicists may have found an opportunity to confirm this via a device that was built for another purpose. They take advantage of the fact that something with three dimensions (an object with length, width and height like a box) can hold more stuff than something that has only two dimensions (an object with just length and width like a sheet of paper). A two-dimensional pixel when projected in three-dimensions will appear more blurred than the original and if such blurring is detected, then this would support the view that we are holograms.

[Personal speculation: It would take a longer explanation but it occurs to me that if we are holographic projections from a two-dimensional surface, by analogy, one possible way from the Universe to end is to evaporate, or collapse into an infinitely dense point, i.e. a space-time singularity sort of like the fate described in the Big Crunch but in a different way...]

Zone - Secret Base

English - Briton vs. Singaporean

Someone emailed me this comparison...

Who says our English is teruk? Just see below - Ours is simple, short, concise, straight-to- point, effective etc........

WHEN GIVING A CUSTOMER BAD NEWS
Britons: I'm sorry, Sir, but we don't seem to have the sweater you want in your size, but if you give me a moment, I can call the other outlets for you.
Singaporean : No Stock.

RETURNING A CALL
Britons: Hello, this is John Smith. Did anyone page for me a few moments ago?
Singaporean : Hello, who page?

ASKING SOMEONE TO MAKE WAY .
Britons: Excuse me, I'd like to get by. Would you please make way?
Singaporean : S-kew me

WHEN SOMEONE OFFERS TO PAY
Britons: Hey, put your wallet away, this drink is on me.
Singaporean : No-need, lah.

WHEN ASKING FOR PERMISSION
Britons: Excuse me, but do you think it would be possible for me to enter through this door?
Singaporean : (pointing the door) can AR?

WHEN ENTERTAINING
Britons: Please make yourself right at home.
Singaporean : Don't be shy, lah!

WHEN DOUBTING SOMEONE
Britons: I don't recall you giving me the money.
Singaporean : Where got?

WHEN DECLINING AN OFFER
Britons: I'd prefer not to do that, if you don't mind.
Singaporean : Don't want la...

IN DISAGREEING ON A TOPIC OF DISCUSSION
Britons: Err. Tom, I have to stop you there. I understand where you're coming from, but I really have to disagree with what you said about the issue.
Singaporean : You mad, ah?

WHEN ASKING SOMEONE TO LOWER THEIR VOICE.
Britons: Excuse me, but could you please ! Lower your voice, I'm trying to concentrate over here.
Singaporean : Shut up lah!

WHEN ASKING SOMEONE IF HE/SHE KNOWS YOU.
Britons: Excuse me, but I noticed you staring at me for some time. Do I know you?
Singaporean : See what, see what?

WHEN ASSESSING A TIGHT SITUATION.
Britons: We seem to be in a bit of a predicament at the moment.
Singaporean : Die-lah!!

WHEN TRYING TO FIND OUT WHAT HAD HAPPENED
Britons: Will someone tell me what has just happened?
Singaporean : Wat happen Why like that....

WHEN SOME ONE DID SOMETHING WRONG
Britons: This isn't the way to do it here let me show you,
Singaporean : like that also don't know how to do!!!!

WHEN ONE IS ANGRY
Britons: Would you mind not disturbing me
Singaporean : Celaka u

Has a ring of truth which is why i'm posting it.

Gaza

In solidarity with the people of Gaza. (Via 3Quarksdaily.)

Update Jan-2-2008: Via Crookedtimber, here's a Petition calling for an end to the violence. I hope you take the time to sign it.

Princess Princess － 世界でいちばん熱い夏

Update Jan-15-2009: Earlier video taken down so i reposted another version.

Update Feb-11-2009: Video taken down again, so i reposted another version.

Jun Lozada's Open Letter to Joc Joc Bolante

Jun Lozada offers some advice to Joc Joc Bolante.

Dear Joc-Joc,

Allow me to call you Joc-Joc as you have been known in the media and by many Filipinos too. As of this morning of the 24th of October, 2008, news about your lawyer petitioning the Supreme Court to issue a Temporary Restraining Order (TRO) against the implementation of the arrest warrant issued by the Senate upon your arrival, hugs the headline of the major dailies together with the radio and TV news broadcast. The whole country seems to be anxiously awaiting your return, I am sure your family is also eager to see you back as well.

It is about your family that I am writing you about, because of what my own family went through when I was in a similar situation that you are in now. Being a father myself, I know that the welfare and safety of your family is your foremost concern in the middle of all the controversy and the uncertainty that you are facing.

There is so much fear right now that pervades your life along with your loved ones. Questions such as: how safe are you in Manila? Is there a possibility that someone may attempt to harm you or your family? How are the people that you are covering for, going to help you? How are you going to answer questions from media? How can the people you are covering be trusted with their dilatory tactics to get you off the hook, away from the prying questions of the opposition senators?

We get caught up in all of these questions of “us versus them” way of thinking, that we almost forget to ask the right questions anymore, right questions such as: how are my children hurt with the truth that I am generally perceived as a corrupt criminal by the Filipino nation? How are my children going to explain my involvement in this fertilizer scam to their friends? How is my wife going to face our friends and still be seen as a person with integrity? What legacy am I leaving my children? Is leaving them with millions of money and big houses in Ayala Alabang better than leaving them with a good name?

I am sharing these with you, because if there is one thing that I did regret in telling the truth about how this Arroyo administration has been stealing from the very people it is supposed to serve, it is that I was not able to prepare my wife and my children well enough against the backlash of this government’s wrath against me for telling the people about their crimes. You still have time to discern your next move, whether or not you are going to tell the people the truth about the fertilizer scam or bring the secret to your grave, just like Romy Neri. As a father, I am asking you to please think about your children, please consider the legacy you are going to leave to them. Are you going to forever leave them as pariahs branded as children of a thief–or as children of someone who did wrong and yet chose to serve his country at the end, rather than to be a captive forever of the dark forces he used to serve? And please prepare your family whatever way you may wish to choose. Discuss this together with them because at the end of it all, they will suffer or be affected more as a consequence of your decision.

Secondly as a fellow Rotarian, how about asking the Four Way test as part of your discernment process? Is it the Truth? Is it fair to everyone concerned? Will it build goodwill and better friendship? Will it be beneficial to everyone concerned? You have been a good Rotarian for many good years of your life. Will you now turn your back on these ideals in the biggest test of your Rotarian values?

Lastly, let me share with you one of the most profound lessons I have learned in my own journey towards the truth, a truth not as a goal to be reached but rather as a way of life to be lived. I have found that the opposite of all the fears I am confronted with is not courage but faith. It is faith in a God who said, “I am the way, the truth and the life.”, a just God who will judge us not in terms of the wealth we have on earth but in terms of what we did to our fellow human beings. It is my faith in this God that allowed me to face all the fears that I am confronted with when I decided to tell the truth that I know about the NBN-ZTE scam. May you find the faith to lead you to the Light of God’s love that no darkness can ever defeat, not even a President of the Republic of the Philippines.

May God bless you with the wisdom to choose your path.

Jun Lozada
2008-24-Oct

(Also via Ricky Carandang and Ellen Tordesillas.)

George Michael Unplugged - I Can't Make You Love Me

Paul Krugman Wins the Nobel Prize

Excellent and timely choice for the Nobel Prize in Economics. Here's a comprehensive background courtesy of Tyler Cowen as well as an overview of Krugman's New Trade Theory by Alex Tabarrok. Krugman's books The Accidental Theorist and Pedding Prosperity are among my favorites. For more, you can visit his Unofficial Web Page.

Update Oct-16-2008: Here's Paul Krugman explaining in layman's terms the work for which he was given the award.

Why Not the Philippines?

...as the Conservative's 'Canada'. I'm confident the Red State voters will find a lot of ideological soulmates over here.

Update 9:55pm: Let me clarify, this is by no means, an invitation.

Bhangra Michael Jackson

From Britain's Got Talent. (Hat Tip 3Quarksdaily)

Snapping out of the Financial Crisis

Back in the year 1582, the dates October 5 to 14 (inclusive) did not exist in the Roman Catholic world* by virtue of a decree by Pope Gregory XIII. This meant that October 4 was followed by October 15. Skipping over ten days was a necessary step to compensate for the misalignment with the seasons that crept into the Julian Calendar over the centuries.

I wonder if the Chairman of the United States Federal Reserve (whose authority is often compared with that of the Pope) can fix the current subprime mortgage-induced Financial Crisis in a manner similar to Pope Gregory's approach.

This is not to say that the Fed can solve the USA's very real economic problems by decree, nor do i think that it is possible to avoid a recession. However, i believe that these real economic problems are being compounded by a crisis involving artifacts of finance and accounting. It is this latter element which i believe can be eliminated by decree. The current crisis can be broken down into a few related, but distinct elements:

A. Collapse in House Prices: The bursting of the Housing Bubble has impaired the ability of mortgage holders to pay off their housing loans.

B. Reduced Demand: With the fall in the values of houses and other investments, the elimination of the Wealth Effect has resulted in a decrease in consumer demand which feeds the economic downturn.

C. Credit Crunch (Internal): The reluctance of banks and other financial institutions to extend loans to each other due to the uncertainty in the financial health of these institutions as a result of their having traded in potentially toxic financial instruments.

D. Credit Crunch (External): The unwillingness by banks and financial institutions to extend loans has spilled over to a general to businesses, government and the general public.

Figure 1: Elements of Economic Crisis (click on image to enlarge)
While nothing much can be done with the collapse of house prices ('A') and the resulting decrease in consumer demand ('B'), i believe there may yet be an opportunity to decree-away the Credit Crunch among Financial Institutions ('C'), and save the real economy from the worst effects of such a credit crunch ('D').

Update Oct-6-2008: Economist blogger J. Bradford DeLong, gives an indication of the relative proportions of some of the above categories:

Category	Value (in US Dollars)
Mortgages (A)	11 Trillion
Financial Assets(C)	60 Trillion
Business Borrowings (D)**	0.2 to 1.4 Trillion

Former Lehman Brothers Chairman Richard Fuld, in his testimony before Congress made the following recommendation moving forward:

"We need to set up a master netting system where all trades and transaction, positions, are all downloaded nightly. The regulator would have a complete view of the financial landscape."

This is an opportune statement since part of what i have in mind is for the Fed (or designated regulator) to set-up and use such a master netting system to offset the toxic financial instruments that these banks and financial institutions owe each other. The other part of what i have in mind involves actions such as a declaration by the regulator that Credit Default Swaps (CDS) will no longer be honored and any premiums paid on this financial instrument will be returned (and any income recognized on these instruments reversed). The objective of such type of regulatory actions would be to untangle the complex web of derivatives that are currently undermining confidence in and paralyzing the global financial system.

Update Oct-7-2008: Economist-blogger Tyler Cowen reports that the proposed clearinghouse for Over the Counter (OTC) derivatives is moving closer to reality. As Cowen explained:

"In essence homogenization and trading through a clearinghouse limits the leverage issue to a single, easily-regulated institution and therefore it limits the problem of counterparty risk"

Update Oct-8-2008: Physicist-blogger Sabine Hossenfelder makes a good point in highlighting the virtual character of much of money (and credit)...

"Now keep in mind that only a negligible amount of the money traded is actually used for consume. The vast amount of it is a pushing back and forth of promises, people trying to be smart, people panicking, people losing faith, people trying to save what they think is left. There are records of all these trades."

...and recommends, among other things, to "Reset the distribution to an earlier state ".

Update Oct-11-2008 10:40am: I just tuned in to CNBC and found the talking heads criticizing the underlying concept behind Credit Default Swaps (CDS). My question is, why only now? Where was such criticism during the good times when CNBC (among others) was cheerleading the bubble? In any case, i sense that the underlying zeitgeist is starting to move toward my suggestion above to declare these instruments null and void.

*As per the referenced Wikipedia entry, among the non-Catholic countries, the Gregorian calendar was adopted much later.
**range of values from 2003 to 2007.

Tokyo Rush

Music starts at 0:40.

Middle Class Revolt Against Democracy

With the benefit of hindsight, we can see that the Philippine Middle Class has served as the bellwether for two trends, the first being the advance of democratic reforms in the 1980's and 1990's, while the second is its subsequent retreat a decade later. The original EDSA People Power Revolution in 1986 which ended the Marcos dictatorship, heralded similar pro-democracy movements notably the Revolutions of 1989 that resulted in the collapse of Communism in Eastern Europe.

On the other hand, the second such People Power movement in the Philippines (aka EDSA Dos), while retaining the superficial characteristics of its predecessor, toppled a genuinely elected President, and is therefore considered by many as a reversal of democracy. Whatever the merits and demerits of EDSA Dos, the subsequent silence and rationalizations for inaction by the Philippine Middle Class when confronted with the reality of Electoral Fraud by the incumbent further validates its retreat from previous democratic aspirations. As this featured article observes, this Middle Class-led retreat from democracy is now a worldwide trend.

I believe that the main drivers for such a reactionary turn has been the ability of the poor to assert their numerical superiority to vote in their chosen candidate into Office, as has happened in Latin America's Electoral Revolutions. Unfortunately for the relatively fewer Middle Class, these chosen leaders either do not have their respect (as in the case of the late FPJ) or advocate policies that are perceived to be contrary to Middle Class interests (as in the case of Venezuela's Hugo Chavez or Bolivia's Evo Morales). What makes it easier for the Middle Class to turn away from democracy is the unfortunate fact that many among their ranks are afflicted with an Elitist Mindset and do not consider the poor as equals when it comes to the exercise of democratic rights. In Thailand, this sense of superiority has become the basis for the Thai democracy activists' logic as described by Randy David:

"What Thailand’s democracy activists say they are fighting for seems to be something more. They see the pursuit of democracy as the protracted struggle to organize the poor as empowered political subjects, to wean them away from their subjection as an army of docile voters activated purely by money and patronage. They are determined to keep at bay the traditional politicians that have preyed upon the ignorance and vulnerability of the Thai masses—by constitutional means if possible, or by extra-constitutional pressure if necessary."

These rationalizations are as self-serving as they are familiar. Over here, i expect that similar plans are underway to make the Philippine 2010 elections the last one that formally adheres to the principle of one-man/one-vote.

Related Entries:

• State Chart of Philippine Democracy: Future Scenarios.
  
• State Chart of Philippine Democracy: Status Update.

Teriyaki Burger

Neville Chamberlain in Context

In response to my reference to Neville Chamberlain in my previous post, my friend Melvin offers the following thought-provoking analyses:

"Interesting thought about your comment that makes it sound as if Neville Chamberlain was responsible for bringing in a predicament to Britain prior to World War Two.

I am of the opinion that Chamberlain was trying to obtain 'peace in [their] time'. He probably could have been aware that British forces were not (yet) ready to face a suddenly and surprisingly resurgent Germany (whose capabilities should have been made in check by the burden of war reparations that was imposed on it as a loser of the previous Great War). It was the depression-hit 1930s after all. Britain, France, and other countries were struggling with the economic crisis at that time (which is probably the reason why a desperate Germany even considered being aggressors, spurred on by a feeling that they were unjustly punished for the Great War).

The isolationist stance of the new world power United States was not comforting -- and it showed during the Manchurian and Ethiopian invasions and the Austrian annexation. The pariah Soviet Union looked very menacing, as she was intent on exporting her revolution outside her borders and undermining the capitalist empires. Winston Churchill could probably have done exactly what Chamberlain did in 1938."

He adds...

"About the situations in the late 1930s. I don't think anyone could be sure whether Hitler will no longer be making more land grabs. Up to that time, Hitler's annexations were territories where Germans lived.

As for Chamberlain's credibility [to lead in World War 2], how similar would his situation be with Woodrow Wilson, who won the 1916 election with the slogan 'He kept us out of the war'...

...Could Chamberlain just have been echoing the sentiments of the British in 1938? The British fought a grueling 4-year war just 20 years before, where she lost many of her citizens and badly dented the mighty British Empire.

I am really wondering whether Britain and France were really ready to fight Germany at that point. World War II was won largely because of two other countries -- the menace Soviet Union fighting on their side and the United States joining in more than 2 years after the war started.

It is hard to imagine Germany allying themselves with the Soviets. Hitler was also strongly anti-Communist and thinks the Slav peoples do not belong to the Aryan race. The Nazis and the Communists were (indirectly) fighting each other in the very bloody Spanish Civil War that was happening at that time. Maybe Chamberlain thought Germany could be exhausted by that war, and he could really trade peace in their time?"

Neville Chamberlain's name is often mentioned in the context of Appeasement, but Melvin's description of the factors that Chamberlain had to consider gives us an idea that reality is never that clear-cut.

Update Sept-07-2008: Commenter Karl adds...

"Maybe another reason for Chamberlain not to go to war aside from war fatigue is that he was dying at that time. After he resigned as PM, he was assigned as an adviser to Churchill for the war but, unfortunately, he had to resign again because he was terminally ill. He died of cancer in 1940."

Swissy - How It All Started

Cool OPM from Swissy*.

*The above and other similarly good songs are available in her album, She Smiles. Also available on iTunes.

The Day Ninoy Died

I remember it was a weekend, when i heard the news (either on TV or on radio - i no longer remember), i immediately went upstairs and told my Dad. As a fifteen year old high school senior, i really didn't know and care much about politics so i was surprised at the reaction that was etched in his face, as if some part of the world crumbled.

The coming days and months would make it clear to me how much things have changed for the worse and my reaction, along with that of my fellow La Sallites, was anger - at Ninoy, as well as ambivalence. (You can get a flavor of what the prevailing sentiment among the student body at that period, from this contemporary post by fellow blogger Rom. We were such a reactionary bunch.) I was thinking to myself, how dare he come home and ruin the best years of my life? High school was supposed to be a fun time when i was supposed to finally meet girls. Now all i have to look forward to are brownouts, bombings and NPA attacks which means i wouldn't be able to get out of the house that much.

Somehow, we adapted and high school still turned out to be among the best years, and eventually, i came around to realize that Ninoy's coming home was a good idea, if not for him, for the Filipinos in general.

If it has to be war...

...let's go about it the right way.

1. Those responsible for getting us into this predicament cannot be the same ones to lead us out of it. At the very least, no one deserves to die just to further their agenda. In the UK, for example, Neville Chamberlain had to be replaced by Winston Churchill.
2. Related to this, we need to strengthen the Philippine Military by purging it of officers who acted as hired bodyguards of the present leadership and reinstate those who embody its true ideals and know how to fight.
3. Instead of relying on private armies, vigilante groups, all those fighting on the government side should be regularized. This is to prevent the problem of having to deal with private warlord armies in the aftermath.
4. Any conflict would not be isolated to Mindanao, so prepare for a general mobilization. Consider conscription.
5. My fellow bloggers seem to be confident that the MILF does not represent the Muslim people and are no more than bandits. I'm not so sure but even granting that premise, the conduct of the war should be such that we take care not to make this a generalized Christian vs. Muslim conflict. It will be difficult to do this once bombs start going off in Manila, but the Government, Media and Civil Society groups (Secular, Christian and Muslim) should prepare for this. If necessary, laws against Hate Speech must be promulgated.

I'll add to the list if i think of anything else. Feel free to contribute in the comments section.

Princess Princess - 19 Growing Up

Some late-80's J-Rock.

Cuban Missile Crisis Redux...

...that's what we could be in for if the United States and Russia miscalculate in their respective acts of brinkmanship in and around Georgia.

Source: BBC
The BBC reports that the US Military is going to deliver humanitarian aid to Georgia. While this is consistent with their past actions in Burma after Cyclone Nargis and in the Philippines after Typhoon Fengshen(Frank) where the Americans deployed their Navy for this purpose, doing the same thing in a situation where Russia is one of the belligerents has the potential to further destabilize the situation.

If matters deteriorate further, this time around, Fidel Castro's role* could be reprised by Georgian President Mikheil Saakashvili.

Update August 17, 2008: US TV Network Fox News interviews Amanda Kokoeva, a 12-year old American girl visiting relatives in South Ossetia when the Georgian-South Ossetian war started. She clarified...

"...i just wanna say that i was running from Georgian troops bombing our city, not Russian troops. I wanna say 'thank you' to the Russian troops that were helping us out.".

(Hat tip: Antiwar.com.)

*As per Wikipedia, during the Cuban Missile Crisis, "In a personal letter to Khrushchev dated October 27, 1962, Castro urged him to launch a nuclear first strike against the United States if Cuba were invaded, but Khrushchev rejected any first strike response."

Joe Hisaishi - Kaze no Tourimichi

Beautiful soundtrack.

A Framework for Making Food Subsidies, Land Reform & Victory Gardens Work

In my previous blog entry, along with the flat tax, i proposed 20 pesos per day food stamps that every Filipino adult (ages 18 to 64) can avail of if he/she chooses to. Since then, i have thought out further details on how this arrangement might work while at the same time help in implementing land reform as well as increase local food production. This approach is summarized in the following diagram:

Figure 1: Framework for Food Subsidies, Land Reform & Victory Gardens
(click on image to enlarge)

(to be continued)

The Middle Class Way of Life...

...is fragile, and can only be preserved by choosing the right set of values and collectively defending them.

Horie Mitsuko Live Concert 2000

Spirited performance.

The Benefits of Sharing the Income Tax Burden: A Possible Scenario

In the my preceding post, i made some suggestions related to taxes, wages and safety nets. Depending on which segment of society you may belong to, chances are, you would have liked some portions of the proposal and disliked others. However, i believe that the proposals have to be taken as a package because there should be an element of give-and-take, where benefits and burdens are widely shared among the various Economic Classes within Philippine Society. A visual summary of the benefits and burdens allocated to each sector is shown below.

Figure 1: Tax, Wages & Safety Nets: Trade-offs Between the Classes (Click on image to enlarge)
To give a more concrete example on the potential benefits of the above, i'd like to walk through a hypothetical scenario in which the above package of recommendations were implemented back in 2006. I chose this year because this was when the most recent Family Income and Expenditure Survey (FIES) was conducted, the results of which i can then use as basis for this scenario building exercise.

A. The 2006 FIES Results

In terms of average individual incomes per segment (classified in deciles), the FIES for 2006 shows the following:

Table 1: 2006 FIES Average Income, Expenses and Savings by Income Decile
Notice that the annual savings of the richest ten percent of Filipinos (at 156K pesos) is bigger than all the other income segments combined. At the other extreme, you have the poorest thirty percent, on average, actually ending up with a deficit, i.e. having more expenses than income.

Consolidating all the individual incomes within each category, we get the total incomes per decile...

Table 2: 2006 FIES Total Income, Expenses and Savings by Income Decile
...which can in turn be represented visually below:

Figure 2: 2006 FIES Income and Savings
(Click on image to enlarge)
The 2006 FIES reveals a situation where one-third of our population is unable to meet its expenses much less save for the future (as represented by the people who are underwater in the above diagram). What then would the situation be if my mix of proposals were implemented? The rest of this entry describes one possible outcome.*

B. The Possible Impact of 12% Flat Tax and 20 pesos per day Food Subsidies on 2006 FIES Data

With the recommended twelve percent flat tax and 20 pesos food subsidy (that comes in the form of vouchers similar to the food stamps in the United States) for all adults ages 18 to 64, the individual expenses** and savings of the different income segments will become as follows:

Table 3: 12% Flat Tax and 20 pesos Food Subsidies applied to the 2006 FIES Average Income, Expenses and Savings
As can be seen above, with the flat tax and food subsidies, even the bottom thirty percent of income earners are now able to have some savings***

The resulting aggregate income would then be...

Table 4: 12% Flat Tax and 20 pesos per day Food Subsidies applied to the 2006 FIES Total Income, Expenses and Savings
...and the over-all situation**** in terms of savings improves for all segments of society (as represented by the increased number of coins in the diagram below).

Figure 3: 12% Flat Tax and 20 pesos per day Food Subsidies applied to the 2006 FIES Income and Savings
(Click on image to enlarge)
For the Upper Tier of Society, more savings***** means more funds that can be invested in housing, education or business activities.

C. Conclusion

From the above example, we can see that a combination of lowering the income tax to a flat rate of twelve percent and providing food subsidies of twenty pesos for each Filipino adult (18 to 64 years old) may (all other things remaining equal) result in a near doubling of the aggregate savings rate (809 Billion from the original 428 Billion Pesos aggregate savings).

Notes:
*Outcomes depend on factors such as the accuracy of FIES data (which i used as basis for the above), eventual tax collection efficiency as well as the propensity by which people may try to game the system to avoid paying their share.
**Expenses are reduced because taxes are included as part of household expenses. You can refer to the FIES Method of Computing Family Income and Expenses here.
***Given the assumption that the individual income earner does not choose to increase his/her expenses on other commodities and services.
****I am, of course, talking in terms of averages which means that within a given segment, there will still be those who are better and worse off. Uniformly better outcomes is highly improbable.
*****Included in this savings amount is the amount deducted for Social Security, Housing and Medical Insurance which i also proposed to be at a cumulative 12 percent of taxable income.

Towards A New Social Contract on Taxes, Wages & Safety Nets

The recent blog entries* related to VAT and dole-outs have gotten me to thinking of a holistic package of recommendations related to both the Tax burden and Social Safety Nets.

I. Basic Principles

I believe that any such set of recommendations must be based on a set of principles by which we envision Philippine Society to operate under. The principles that i have identified (so far) are the following**:

A. Principles related to Safety Nets

A.1 No Excuse for Hunger. Given our abundance of resources, there is absolutely no reason why any Filipino (employed or unemployed) should go hungry in his own country. For starters, there is absolutely no excuse to have people resort to recycling garbage for food.***

A.2 Fair burden across sectors. In the interest of fairness and social cohesion (essential to building up social capital****), no segment of Philippine Society should be unduly burdened in sustaining the government and its social programs. In particular, the Middle Class has been feeling particularly besieged and consequently alienated. This is in no small part because they see that they are the only ones paying income taxes while the majority poor, do not.

A.3 Social Security before Taxes. A person's income should first be allocated to social security (i.e. retirement benefits, housing and medical insurance) before it is allocated to taxes. Here in Singapore, for example, the amount deducted for Social Security is higher than the amount deducted for income taxes.

B. Principles Related to Capability Building and Demand Generation

The foundation for industrial development is a healthy domestic base.

B.1 Obligation to Give-back. Every recipient of social welfare should have the responsibility to give back to Society by using his capabilities to contribute to social welfare and economic development.

B.2 Subsidies as Stimulus. In the interest of pump-priming the economy, Safety Nets should first be allocated to consumption. A study by the United State's Congressional Budget Office identified direct injections (such as unemployment or food stamps provisions) to the poor as having the biggest effect to propping up consumption which is important to avoiding a recession. In this sense, the much criticized katas ng VAT dole-outs are actually a step in the right direction in terms of its multiplier effect.

C. Principles Related to Development: Investment, Innovation and Technology

The key to economic development is to build up local capabilities to innovate and continuously improve on existing technologies.

C.1 Savings before Consumption. Tax incentives and disincentives should be structured to prioritize savings over consumption.

C.2 Culture of Entrepreneurship and not Dependence. Entrepreneurial activities should be encouraged and dependence of OFW remittances should be discouraged.

The following are the specific recommendations that are based on the above principles.

II. Specific Recommendations on Taxes, Social Security and Income Subsidies

1. Flat tax on income: For all salary and wage earners, impose a uniform income tax rate. The initial rate can be pegged at 12 percent.

Table 1: Existing***** versus New Income TaxesUpdate Oct-18-2008: Just to emphasize, Exemptions not applicable on New Tax Due
As shown on the above table, given this recommendation, any salary or wage earner who receives an annual taxable income of 70,000 pesos or above will receive a tax relief, while those receiving less will have additional tax burden. (Note that in the above, the subsidies for the lower income earners haven't been factored in. The effect of subsidies is shown in Table 2 below.)

2. Equal or bigger Social Security Contributions relative to Income Taxes. Similarly, impose a uniform social security contribution (includes SSS, Pag-Ibig, Medicare and/or GSIS) rate that is equal or higher than the income tax rate, in this case, the cumulative rate could also be pegged twelve percent. This deducted amount will then go into retirement, housing and medical insurance of the employee and/or wage earner's At the same time, the pool of savings can still be made available to extend credit to the contributors or to support the government's socialized housing and health maintenance programs.

The Employer's contributions could be pegged at half of the employee's i.e. six percent. (Additionally, if we want to roughly follow the Singapore model, the total contribution of both employer and employer can be capped at Ten Thousand pesos per month each.)

The benefit of the first two recommendations has to do with principles A.2 and A.3. A flat tax covering all income levels will mean that no segment of the salary and/or wage earning population would feel that they are unduly taking a disproportionate part of the burden and help eradicate the Paano Naman Kaming Mga Middle Class sense of victimhood.

3. Replace tax exemptions with subsidies for both employed and unemployed. The Fair Burden Principle (A.2) above means that the tax base should be widened****** to cover the entire working population. If left as it is, for the lower income groups, this would clash with the No Excuse for Hunger Principle (A.1). Therefore, a survival subsidy, in the form of food stamps, initially pegged at 20 pesos per day per adult (18 to 64 years old) should be provided. Table 2 below calculates the net relief across all the income brackets illustrated in Table 1.

Table 2: Net Tax Relief (Burden)Update Oct-18-2008: Just to emphasize, Exemptions not applicable on New Tax Due
The above table illustrates that the 20 pesos per day food stamp subsidy covers adults (18 to 64) of all income brackets, even those with zero income, i.e. the unemployed. This institutionalizes and systematizes the katas ng VAT and provides a basic layer of social safety net, one that addresses hunger to fulfill Principle A.1 while at the same time, helping sustain consumer demand that drives the economy (Principle B.2). This is also an improvement over tax exemptions on minimum wage earners because it also considers the welfare of the unemployed who outnumber the employed.

4. Eliminate the minimum wage.******* The minimum wage should be eliminated in order to give business enterprises the flexibility to compete in the world market (in support of Principle C.2). Since the problem is unemployment and chronic underemployment, the priority should be given to creating as many jobs as possible. By comparison, the task of increasing the wages of workers who are already employed is secondary. Besides, reducing unemployment is in the interest of labor because fewer people looking for jobs will ultimately mean a stronger bargaining position.

5. Retain VAT. This is in keeping with the principle of prioritizing savings over consumption (Principle C.1). Retaining VAT will also enable continued funding of food stamps (Principle A.1).

6. Tax OFW remittances. OFW Remittances should be included as part of income and taxed accordingly. This is in keeping with the principle of discouraging a culture of dependence (Principle C.2).

7. Implement a National ID. This National ID could be either the SSS/GSIS ID, the BIR's Tax Identification Number or a separate number altogether. Such an ID is needed to facilitate the distribution of subsidies as well as the collection of taxes and social security. To prevent abuse, the introduction of the National ID should be accompanied by increased safeguards on privacy.

III. Conclusion: A Foundation for Investment, Innovation and Technology Improvement

Each of the preceding recommendations will benefit certain segment of Society and impose a burden on another. It is therefore important to take a holistic approach in the spirit of give and take among the different sectors. Below is a visual summary of the complementary roles of Social Security Contributions and Taxes in achieving our objectives in the areas of Survival, Civilized Living, Capability Building and balancing Consumer Demand with Investment.

Figure 1: Taxes and Social Security Contributions as applied to Areas of Nation Building********
While we should not lose sight of the fact that our economic development ultimately depends on our home-grown ability to innovate by continuously improving existing as well as developing new technologies, not having to be preoccupied with matters of survival is an essential first step.

Notes:
*An initial formulation of my recommendations can be found in the comments section of this blog entry over at Manolo's. Blog entries on the VAT issue that i have read include:

• On Oil Deregulation and E-VAT by Cocoy, a defense of Oil Deregulation and E-VAT.
• Scrap VAT on on Ellen Tordesillas, Senator Mar Roxas' recommendation to scrap VAT on Petroleum products.
• Will cutting taxes help the poor? By Cielito Habito, Former NEDA Secretary General Cielito Habito cautions against scrapping VAT.
• obscenely oppressive, that’s VAT! by Angela Stuart-Santiago, an eloquent plea to remove the onerous burden of VAT.

**I'll update the list as and when i think of additional principles.
***Known as 'pagpag', a term i first heard from fellow blogger The EQualizer.
****I realize that, strictly speaking, social capital brings about social cohesion (and not the other way around) but i nevertheless believe that anything that increases social cohesion increases social capital as well.
***** Refer to the BIR Website for existing guidelines.
******See also Solita Monsod's criticism on the recent law granting tax exemptions on minimum wage earners. (Hat tip to Manolo.)
*******This does not mean that Labor Unions should be discouraged. On the contrary, strong Unions should be encouraged in order to have the workers' interests represented in a tripartite partnership between labor, management and government.
********Not all items shown on the diagram are discussed in this present blog entry. Manolo Quezon reintroduced the idea of Victory Gardens to mitigate the effects of the food crisis. I briefly described my version of a large scale implementation this concept in this comment.

Chisato Moritaka: Shiritagari

In the Absence of Empathy or Foresight...

...solving a problem is often a matter of getting the right group of people to feel the pain.

GK's Agenda

Me : Gawad Kalinga is primarily a racket to win converts.
Tony Meloto: No it's not.
Carlos Palad: Yes, it is.

Western Music and Math

In Seed Magazine, a mathematical explanation of how melody and harmony combine to make [Western*] music. Turns out that musicians have been doing geometry all along.

(Hat tip: 3Quarksdaily.)

Update Jan-31-2009: Gary Granada's exposition gives us a tangible example of this.

*The article explains that many forms of non-Western music have melody, but no harmony.