It’s best to tighten beltThe government announced that it may need to issue national bonds to provide funds for national projects, such as basic old pension, if measures are not taken. Projects that consume lots of money include basic old age pension, measures in the Korea-United States free trade agreement and the second phase the national balanced development plan. If basic old age pension is implemented, the fiscal burden is expected to swell to 19 trillion won ($20.4 billion) in 2030 from 2.5 trillion won next year. How much the Korus FTA and the second phase of national balanced development plan will require are not even measurable.
There is a long list of other projects that cost a considerable amount of money now: 119 trillion won for measures to protect agriculture, 67 trillion won for military reform and 66 trillion won for national balanced development. Even the absurd policy of “Vision 2030,” which requires more than 1,100 trillion won, is a whooping amount of money. But there are no other sources to turn to for raising money.
With potential growth rates slowing down, raising taxes has its limits. Last year, real estate taxes, including the comprehensive real estate tax, made up for the shortfall. Labor income taxes, which are from wage workers, increased by 80 percent under the current government. There are no other sources to raise funds. To make matters worse, taxes are squandered everywhere.
The solution is obvious. The administration should cut down on expenditures. It would be reasonable to shift to a small government and discard non-pressing national projects. But it is lamentable that the government has attempted to spend money even by running into debt. As a consequence, the national debt totaled 282 trillion won at the end of last year, an increase of 149 trillion won for four years.
The government says that finances are still sound compared to advanced countries, but it fails to see that national debt is rapidly snowballing. It may be that the government wishes to cover it up.
If national bonds are issued, we are deluded into thinking that the burden is not so heavy at the moment, so opposition to it would not be huge.
However, the burden is simply passed on to the next generations. Furthermore, once financial stability is ruined, then it is hard to get it right. Therefore, previous administrations have focused on maintaining finances in a sound way. They tried to do so, given that possible unification may incur costs in the process. And financial stability allowed our nation to overcome the 1997-98 Asian currency crisis successfully.
We strongly urge the government to tighten its belt rather than make easy policies that incur debts. At the end of Mr. Roh’s term, it would be wise to keep a sound financial policy rather than take on new projects.
This also goes for the National Assembly. If legislators push ahead with pork-barrel policies, only conscious of winning votes, then history will not let those responsible go unpunished.