Many news reports erroneously reported the Majlis had already voted to freeze the program, Other news reports made an even bigger error by saying the Majlis decided to cancel the program.
The chairman of the Majlis Economic Committee, Deputy Gholam-Reza Mesbahi-Mo-qaddam, introduced a bill last week that would freeze the program where it is now, neither shifting more subsidies into direct welfare payments, nor rolling back the program that now exists.
He said he was concerned that with the economy tottering, now was not the time to tamper with the subsidy program.
Under Majlis rules, the legislature must first vote on whether to consider proposed legislation. On Friday, the Majlis decided to put Mesbahi-Moqaddam’s bill on its agenda by a vote of 179-to-17 with 20 abstentions. It did not vote on the merits of the bill, just to take the time to consider it. (This is called the first reading. In the United States, there is no vote on first reading. A bill is simply assigned to a committee after introduction and without any vote.)
The subsidies-to-welfare shift began in December 2010. The second phase—with subsidies lowered further and direct welfare payments to families raised further—was expected to take place last Now Ruz. But squabbling prompted its postponement. More than half the Persian year has now passed and nothing further has been announced.
Mesbahi-Moqaddam did not indicate if he had some word that President Ahmadi-nejad, the biggest backer of the original plan, was planning some unilateral action that prompted him to introduce his bill. However, Mesbahi-Moqaddam only presented his bill as a single-urgency item, which is not used when time is pressing and instant action is required.
Mesbahi-Moqaddam tried to forestall erroneous coverage of his bill. He specifically told the Majlis, “Subsidy payments will continue like last year and the current year and the suspension of the [proposed] second phase does not mean a halt to the cash handouts that the people receive.”
But, he said, “In conditions where the inflation rate is rising and the currency market is in disorder, the second phase of this plan must be halted.”
Ahmadi-nejad has said nothing about his plans for the second phase since he announced its postponement in April.
The shift from subsidies to welfare payments has long been urged by the International Monetary Fund (IMF). Its concern is that subsidies distort the economy and do not actually benefit the poor. The massive gasoline subsidies, for example, benefited two-car families a great deal, but did no good for villagers who use a mule for transport.
The huge bread subsidies, on the hand, prompted livestock farmers to buy up large quantities of cheap bread to feed their animals, since bread was cheaper than fodder.
The original plan was to make large welfare payments to the poor and smaller welfare payments to the less poor and none to the rich. But the government lacked the skilled bureaucracy to do that, so equal payments are being made to every citizen. Still, that has the effect of shifting some wealth from the rich to the poor.
