Promises that went too far
The taste of social welfare is alluring. Once hooked, one cannot stop. But the sweetness has a price. It must be financed through tax increases or other means. National coffers could be at stake if the government is too generous with welfare spending. Social welfare policy must be closely studied and designed to be sustainable.
None of the presidential candidates are that careful. They make all kinds of promises regardless of the national debt topping new peak of 1,433 trillion won ($1.3 trillion). The five candidates all propose increases in basic monthly pension payouts and minimum wage, childcare and unemployment subsidies.
What could be the most costly is the increase in monthly payout in uniform pensions for senior citizens aged 65 or older and the creation of a new allowance for children. Similar pledges are made by all five leading candidates — Moon Jae-in of the Democratic Party, Ahn Cheol-soo of the People’s Party, Hong Joon-pyo of the Liberal Korea Party, Yoo Seong-min of the Bareun Party and Sim Sang-jeung of the Justice Party.
This is all well, if the country can afford it. Moon proposes to give every senior citizen 300,000 won a month and 100,000 won for every infant aged five and under. This would cost 12 trillion won a year. Ahn also promises pension increases according to income levels and allowances for children under the age of 11. Regardless of who wins, the government would have to spend an extra 10 trillion to 12 trillion won a year to carry out the campaign pledges. The candidates are ambiguous on the financing means. Moon plans to come up with the financing through reforms in fiscal expenditures and increased tax revenue. Ahn also said he would find means through rationalization in tax spending. They are making the same follies of the past administrations that caused confusion through policies on free school meals and daycare subsidies.
Former President Park Geun-hye won nearly 80 percent of the votes from senior citizens with her pledge to give out 200,000 won a month. But the plan had to be scaled down and caused the welfare minister to resign due to financing difficulty.
The next president must come up with a welfare system to address low birth and fast aging. Korea’s birth rate is 1.25, the world’s lowest, and senior citizens already make up 14 percent of the population. The next administration must be extra smart on welfare accounting. Welfare spending reached 130 trillion won this year, taking up a third of the total budget. It has become imperative to set strict guidelines on selective and universal welfare programs.
The candidates failed to provide the financing means for their expensive welfare plans at the second debate. They must revise their platforms or speak frankly on the need for tax hikes before election day to prevent a welfare catastrophe.
JoongAng Ilbo, April 20, Page 34