The Moon Jae-in administration is continuing with its rapid fiscal expansion. It drew up a record 604 trillion-won ($519 billion) budget proposal for next year, 8.3 percent larger than this year’s. It started with a 401 trillion-won budget when it was launched in May 2017, and its budget snowballed 51 percent in just five years.
The growth rate overwhelms that of two previous presidencies -- 32.9 percent for Lee Myung-bak and 17.1 percent for Park Geun-hye. This is mostly attributable to a sharp increase in welfare-related populist spending. With the presidential election set for next March, the government appears determined to spend more money.
Indiscipline in fiscal management is approaching a dangerous level. The national debt is expected to reach 1,068 trillion won or 50.2 percent of gross domestic product. Five years ago, it was 660 trillion won and few would have imagined 1,000 trillion won in national debt. But the Moon government crossed the line. The national debt increased by as much as 408 trillion won and the mind-boggling thing is becoming reality. According to the Korea Economic Research Institute, a baby born this year will assume 100 million won in national debt when he or she graduates from high school.
The government budget swelled rapidly as the government tried each year to offset the side effects of its ill-guided policies with public spending. Its policy of income-led growth caused many jobs to vanish. To compensate, the government created many part-time jobs with tax.
Similar items are seen in the budget proposal for next year, and this time their scale became even bolder. Expenditures related to public health, welfare and employment increased to 216.7 trillion won. This accounts for as much as 36 percent of the entire budget.
In the budget, there are populist expenditures apparently to win over voters with cash handouts ahead of the presidential election and local elections next year. The government set aside 23.5 trillion won for those in their 20s and 30s, most of whom had turned their backs against ruling party candidates in the Seoul and Busan mayoral by-elections. It plans to expand tuition fee subsidies even to middle-class college students and also offer rental aid of 200,000 won to low-income young people each month for a year. It is questionable if the subsidies and aid are necessary. They could be used more productively or to increase care for socially vulnerable classes.
The government plans to spend 31 trillion won creating 2.11 million jobs including 1.05 million ones in the public sector. But many of the public sector positions are part-time jobs to gloss over employment data.
People want affordable housing and stable, decent jobs, but the government keeps taking stopgap measures involving wasteful one-off cash payments. It is splurging to cover up its policy failures such as skyrocketing housing prices and high youth unemployment.
Indiscreet expansion of fiscal spending in a situation where the national debt goes over 1,000 trillion won cannot but lead to tax bombshell. In short, the government is doing people a kindness with tax that they must pay later.
The government set aside 27.5 trillion won for infrastructure projects. The Moon regime condemned massive infrastructure projects of the past as an evil of Lee’s presidency. Then, it drew up the largest ever infrastructure budget. It goes back on its words easily if it thinks it can win the hearts of local residents.
Last year, in a bid to compel the control of the ever-growing national debt by law, the government prepared a code for fiscal stability and proposed that the Parliament legislate it. But the ruling party has not given it a look for nine months.
When the government announced its budget proposal Tuesday, it also unveiled its fiscal management plan. The plan calls for suppressing budget growth to less than 5 percent starting 2023, the year after Moon’s presidency ends.
The Moon government increased its expenditures 8.6 percent on average each year. At the end of its term, however, it is saying that it will keep splurging to the end as it has done so far but that the next government should use money sparingly. It is shifting its responsibility for fiscal soundness to the next administration and eventually to the people. It is both irresponsible and unconscientious.
By Korea Herald (email@example.com