Stopgaps just don’t workAs of last year’s end, our public corporations’ debts topped a whopping 272 trillion won ($250 billion) in total, sharply increasing by 34 trillion won from a year ago. The increase has even surpassed that of the government’s debt by 1 trillion won. The rapid swelling of the public debt certainly resulted from the government’s expedient solutions to its snowballing red ink.
For example, the Korea Water Resources Corporation’s (K-Water) debt alone has risen to 7.9 trillion won - a 165 percent increase from last year - after it took over the government’s four-rivers restoration project. That’s a hefty price the government should pay for opting to use public companies’ coffers to avert deterioration of its financial health.
Such cases are plentiful. The Korea Land and Housing Corporation (LH) saw a 16 trillion won deficit in just one year since it undertook the government’s project to build housing for the working poor.
Kepco’s deficit has already exceeded 33 trillion won after lowering electricity fees to help the government fight inflation. As a result, the Lee Myung-bak administration’s vow to tighten public corporations’ debt management proved to be empty words.
The administration’s policies to rejuvenate the frozen real estate market are no exception. Its decision to cut acquisition taxes on properties was right. But it failed to anticipate strong resistance from local governments, which don’t want to lose their tax revenue. The government should compensate them for revenue loss.
The government’s actions have now reached a worrisome level. It entrusted a considerable portion of the four-rivers restoration project to K-Water after the Greek financial crisis in an attempt to conceal its snowballing debts.
But such a stopgap measure won’t solve the problem, as it only transfers its own debt to public companies whose bulging debts should be covered by taxpayers later.
The government’s approach invites people’s distrust only. How can the government explain why the public corporations’ debt has increased by a double-digit figure in just a year? Can the government also make up for local governments’ lost tax revenues?
It must overcome temptations to resort to quick fixes devoid of deep thinking. Koreans are not naive to be fooled by the government’s quick fixes anymore.
Abraham Lincoln sternly warned, “You can’t fool all the people all the time.” The government should never forget that.