[OUTLOOK]Beware of politicians’ sweet talk

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[OUTLOOK]Beware of politicians’ sweet talk

The National Assembly passed the general account budget only a day before the New Year. Since the “participatory government” came into power, the budget has been barely approved at the last minute for three years in a row. This time, the National Assembly left an unprecedented record of passing the account budget during a boycott by the biggest opposition party. I am truly worried about the housekeeping of the nation, which becomes the victime of political confrontation every year.
The national balance is constantly worsening and government bonds are issued every year to make up the growing deficit. I am especially concerned because the national debt is growing rapidly and has almost tripled in eight years since the financial crisis.
The 2006 budget is particularly worrisome because it was not properly reviewed and was not cut back. Considering that the Grand National Party had committed to cut as much as 8 trillion won ($7.91 billion), we can only say the National Assembly was not very thorough when it approved the 2006 budget after reducing it by only 900 billion won. While the Grand National Party insisted that tax cuts were necessary to revive the economy, this year’s budget only reflects the claim of the ruling party that increasing government spending was a more effective economic boost measure.
Instead, some projects that were planned to ease complaints but do not help the economy much were assigned additional funds at the last minute. I hope Korea does not follow the precedent of Japan, where large government spending became a cause of the “lost decade.”
Another concern is that the local autonomous government body elections, a large-scale political event, are scheduled in May. It is a foregone conclusion that politicians will bet everything they have on this major political event. They will make campaign promises to please the voters and the pressure to increase government spending will be reflected when making the 2007 budget. Or a supplementary budget might be submitted later this year.
The supplementary budget has been approved every year and there is no reason for this year to be an exception, especially when elections are scheduled. Obviously, some politicians will promise tax cuts to please voters. If taxes are lowered when spending increases, the national balance might as well go broke. With the presidential election scheduled in 2007, we have to be prepared for a worst-case scenario.
The government and the ruling party will produce an obvious answer to those worrying about the national balance. They would argue that the size of the national debt is smaller than the average of the Organization for Economic Coope-ration and Development member countries, and that the balance is all right. Moreover, they might even tell us not to fan an unnecessary crisis.
However, they need to pay attention to the economic specialists warning of the possibility of a financial crisis. If the current situation continues, will citizens voluntarily control their basic desire to pay less tax but enjoy generous government spending?
If the politicians are concerned over the deficit, they have to do two things.
First, a law should be legislated and enforced, so that the national balance is managed frugally and effectively. It is still not too late to pass a law to secure healthy financial management, which both the ruling and opposition parties proposed and have been negotiating. It is the most appropriate solution for now when the regional and presidential elections approach.
Secondly, we need to thoroughly keep track and review how appropriately the 2006 budget is used. The establishment, civil groups and experts will have to watch the spending closely. Projects that are pursued without a reasonable purpose or fail to meet expectations will have to be discontinued at the right time.
Most of all, we need patience and composure from citizens not to be mislead by the sweet campaign promises of politicians. After all, it is the citizens who save the national balance. We have to remember that the sweet talk of a generous budget and tax cuts always backfire with an extreme economic slump and high prices.
We, the citizens, have to come forward and keep away the specter of populism in the coming local elections and the next presidential election. The citizens are already struggling with household finances and have the added burden of worrying about the national balance as well.

* The writer is a professor of economics at Sungkyunkwan University. Translation by the JoongAng Daily staff.


by An Chong-bum

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