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Sensible budget supplement

Published: 10 Mar. 2009, 21:55

The latest economic data is baffling policy makers. Large companies still rake in profits and pay their employees. Interest rates remain low and the real estate market is more or less intact. On the surface, the situation doesn’t appear to be as critical as in the days of the Asian financial crisis of the late 1990s. But statistics tell a different story. Each day, the lower and middle income groups comprised of small businesses, the self-employed and part-time workers fall further to the bottom of the economic pyramid. Each month, around 100,000 small businesses close their doors. The household debt-to-income ratio is at a more serious level than during the credit card bust in 2003. A host of small and midsized companies are selling off equipment to pay their employees on time.

Faced with such a grim economy, the National Assembly has turned to a new theme for its political wrangling. Lim Tae-hee, the Grand National Party’s policy chief, recently indicated that the party was mulling a “super-sized” supplementary budget in the amount of 20 to 30 trillion won [$13.24 billion?$19.86 billion] or more, emphasizing that it is aimed to spur job creation. The notion was immediately panned by rival Democratic Party leader Chung Sye-kyun, who said, “To speak of a supplementary budget just a few months into the year reflects how incompetent the government is. It’s just pitiful.”

The opposition party’s scorn is understandable. The government and the ruling party appropriated this year’s budget based on economic growth projections of 4 percent. They turned a deaf ear to the DP’s call for increased spending on public infrastructure and social welfare, citing a need to protect the staggering economy.

Before proposing such a sizable supplement, the government and the ruling party should take care to remember their economic policy responsibilities. By the same token, this is no time for the opposition to be putting its knee-jerk hostility on display every time the ruling party makes a proposal.

In the current crisis, a substantial budget supplement is a necessity, not an option, and the quicker it can be done, the better. The extra funds should be directed toward job creation and shoring up the social safety net, as the opposition party had initially sought.

Meanwhile, the ruling party needs to show some restraint and resist the urge to talk about tax cuts. The budget supplement will be of no use if lawmakers attempt to ease unemployment by allocating the lion’s share of the funds to public construction projects, when they should be directed toward the needy, struggling class.