Major presidential candidates are making a series of costly campaign pledges. But they remain vague about how the required budget could be secured amid ballooning fiscal deficits and national debts.
Worse, both ruling and opposition parties agreed to pass an extra budget designed to help small businesses hit by COVID-19 on Monday, which will add to the fiscal shortfall.
Big-budget campaign pledges look enticing for both candidates and voters, but if such plans go ahead without securing specific sources of funding, the pressure will mount on the government to issue more sovereign bonds -- or take the unpopular step of raising taxes.
According to Korea Manifesto Center, more than 300 trillion won ($251 billion) would be needed to implement some 270 election campaign pledges made by Lee Jae-myung of the ruling Democratic Party of Korea.
And implementing around 200 campaign pledges promised by Yoon Suk-yeol of the main opposition People Power Party would require an estimated 266 trillion won.
Both candidates also said they would spend 50 trillion won immediately after their election to help out pandemic-battered small businesses.
A closer look into their campaign pledges reveals that many of their massive plans appear unrealistic or even reckless in consideration of the country’s current fiscal budget.
Candidate Lee Jae-myung plans to push for a universal income system that will pay out 1 million won each to the entire population on a yearly basis. If elected, Lee said he will implement a youth basic income system that pays 1 million won to citizens aged 19-29 each year, starting from 2023.
Candidate Yoon Suk-yeol pledged to pay out a total of 12 million won in parental pay when babies are born, and hike the basic monthly pension for the middle class, low-income families and the elderly from 300,000 won to 400,000 won.
The two main candidates are also eager to cut taxes, at a time when experts warn tax raises may be needed to handle a growing number of welfare projects. Lee plans to lower taxes for real estate purchases and ownership, while offering more tax benefits for employees. Similarly, Yoon said first-time home buyers will be exempt from acquisition tax or a single tax rate of 1 percent.
As for the funding sources, both Lee and Yoon plan to restructure the current fiscal budgets -- hardly convincing ideas.
Data from the Finance Ministry showed Sunday that Korea’s fiscal deficit surpassed 100 trillion won in the past two years, as the country struggled to cope with the impact from the pandemic. During the same period, national debt shot up by 240 trillion won.
The nation’s fiscal soundness is feared to worsen further as an additional 70 trillion won in fiscal deficit and 100 trillion won of national debt are expected to be added this year.
One factor is an extra budget. The ruling Democratic Party of Korea unilaterally advanced a 14 trillion won extra budget bill Saturday, and struck a deal with the main opposition People Power Party to convene a plenary session Monday to pass the measure.
The push for the extra budget is inviting heated disputes not only about its negative impact on the fiscal soundness but also about the ruling party’s vote-buying attempt as the payout timing that coincides with the presidential election.
For future generations, the country needs to maintain fiscal soundness and reduce the national debt. Presidential candidates should reconsider their unrealistic pledges and refrain from calling for bigger extra budgets.
By Korea Herald (firstname.lastname@example.org