A budgetary tightrope

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A budgetary tightrope

The government has unveiled its 2011 budget proposal, calling for a 5.7 percent increase in fiscal spending from this year.

Officials said budgetary spending in 2011 - pegged at 309.6 trillion won ($271.1 billion) - will largely focus on efforts to create better lives for everyday workers and a brighter future for the broader population.

The bulk of the spending will be funneled into various welfare programs and industries that help drive growth.

It’s understandable that the government put a lot of time and effort into its proposal, as it wants to avoid criticism of its spending plans.

If it increases funding for welfare programs by too much, it will likely draw opposition from observers who think it is taking a populist bent with an eye on the next presidential election.

If, on the other hand, it spends too much on grooming new industries and pumping money into the business community, it will have little money left for programs targeting everyday Koreans and the overall quality of life in the country.

But a quick review of the proposal shows that the government hasn’t quite found the middle ground. Its budgetary focus, it appears, lies more on the welfare side of the equation than in spurring economic and business growth.

Under the proposal, spending for welfare, health care and labor initiatives will rise 6.2 percent to 86.3 trillion won, accounting for 27.8 percent of the total budget.

But expenditures on research and development, industrial promotion, support for small and midsize companies and the energy sector would increase by less than 1 percent, rising to 54.4 trillion won in 2011 from 53.9 trillion won this year. Spending in these areas would drop to 17.8 percent of the budget from 18.4 percent this year. Additionally, social infrastructure expenditures - which help sustain the economy and create jobs - would fall sharply despite an increase in costs to finance the four-rivers restoration project.

As the government begins to tout and defend its proposal, we must question if the shift in fiscal spending to a greater concentration on welfare over growth is the best course in times like these.

Welfare spending can certainly generate an immediate warm response from those who will benefit. But it’s hard to scale back such spending in the future, as public resistance to cuts is just as intense as the initial support for a boost in funding. And it does little to boost the economy.

Industrial investment, however, can lay the groundwork for future growth and set up a solid foundation for economic expansion.

Lawmakers should thoroughly examine the government’s fiscal spending focus when the proposal reaches the National Assembly.
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