The Fiscal Deficit, the National Debt, and Monetary Reality: Old Habits Die Hard

Authors:
  • MSMariel Monica Sauler
    Mariel Monica Sauler
  • CCChristopher Cabuay
    Christopher Cabuay
  • ASAlellie Sobreviñas
    Alellie Sobreviñas
  • SKSusan Kurdli
    Susan Kurdli
  • JPJulián Pérez
    Julián Pérez
  • EAEva Marie Aragones
    Eva Marie Aragones
  • GLGerardo Largoza
    Gerardo Largoza
Publisher website
Google Scholar
Abstract
Chapter 11 (“The Fiscal Deficit, National Debt, and Monetary Reality: Old Habits Die Hard”) is on the government’s finances, fiscal deficit, and national debt, the second main theme of the book. It is widely believed that government finances operate as those of a family or a firm and that the government needs to collect taxes to make payments. The authors argue the so-called “family analogy” is incorrect. Given that the government makes payments (with fiat money) by crediting bank accounts, the sovereign Filipino government may face a resource constraint, but it can financially afford the infrastructure and social programs that the country desperately needs. The chapter provides an empirical overview of the sectoral balances (domestic private sector, government, and external sector) of the Philippines. The fiscal position (mostly deficits) has a mirror image in the private sector (mostly surpluses). The chapter also explains how the Philippine central bank operates, with emphasis on why it issues so-called debt, and provides details of the PHP 300 billion operation between the Bangko Sentral ng Pilipinas and the Department of Treasury to deal with the COVID-19 pandemic in 2020—it did not cause any problems, quite the opposite.