중앙데일리

[VIEWPOINT] Budgetmaking Is Too Political

Dec 28,2000
Budget Transparency Is The Precondition And Ultimate Goal of Budget Reforms
by Kim Dong-kun

After the political parties finally agreed to cut 800 billion won ($649 million) from the government's proposed 101 trillion won for the 2001 national budget, the bill was passed by the National Assembly on Tuesday. While it is fortunate that the budget bill was finalized before the year's end, it nevertheless left a bitter aftertaste because the parties exceeded the legal deadline by about 20 days to wrangle over a cut of 800 billion won, which is less than one percent of the entire budget.

There were reasons why parliamentary deliberations over next year's budget became such a rocky process. The parties disagreed over the keynote macro policy of managing government finances, which stemmed from disparate forecasts over next year's business outlook. They also differed on the objective and nature of several spending items.

The government insisted that it had drawn up an austerity budget, but actually increased the budget by more than 9 percent from its earlier plan. While it could argue that such an increase is necessary to prepare for an economic downturn next year, it is desirable to curb fiscal expansion to restore financial health.

In its proposed budget, the government increased spending on information, education and national defense, but froze the expenditures on social overhead capital projects directly linked with stimulating the economy. Therefore, it was necessary to increase allocations on SOC and others related to stimulating the economy, and it was inevitable that the total amount of adjustments would exceed 2 trillion won inclusive of the 800 billion won net cut negotiated by the political parties.

It is also understandable that there were grounds in the opposition's objection to the budget. However, the deliberation process still left a lot to be desired.

First, the budget size is excessively swayed by political factors. How can a nation's budget be determined by backroom deals between the ruling party and the opposition? While it cannot be totally free of political negotiations, the efficiency of the national economy suffers when political logic takes precedence over economic logic.

Second, the government drew up its budget based on highly optimistic forecasts of tax revenues. It has to therefore make corresponding expenditure changes in the areas where tax revenues are certain to shrink. At the same time, it has to implement pump-priming measures. In short, the government has set a goal of catching two birds with one stone, but failed to demonstrate a firm resolve to achieve this goal.

Even if the spending on SOC investments increase by 500 billion won to create more jobs, it is necessary to examine where and how the money is used, especially in view of the rising criticism over regional development investments being concentrated in certain regions. The government is also seeking an additional 600 billion won to write off debts for farming and fishing households, but we have to ask whether this is not a pork-barrel project.

The government maintains it will scale down non-essential expenditures as much as possible and increase spending to boost the economy, but the budget is still marked by wasteful and pork-barrel spending. Genuine budget reforms will not take place if the National Assembly fails to identify the waste during its deliberation and spends time on partisan bickering and on protecting regional interests instead.

Third, the process of drawing up, evaluating and managing the national budget lacks transparency. A case in point is the public's lack of information on the specifics of budget changes. The parties agreed to make public the details of subcommittee meetings of the Special Committee on Budget and Accounts, but then repealed the decision.

Budget transparency must be secured at all costs, because it is the precondition and the ultimate goal of budget reforms.


The writer is a professor of economics at Seoul National University.


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