Filter out absurd welfare pledgesIf social welfare benefits and programs promised by the ruling and opposition parties on the campaign trail are actually implemented, the cost for the government would balloon and send national debt to above 100 percent of GDP, close to the 120 percent levels recorded by Greece, Spain and other near-bankrupt European countries.
According to a study by the Korea Institute of Public Finance, the country’s debt would shoot up to 102.6 percent of GDP from the current 33 percent under the welfare programs suggested by the ruling Saenuri Party. That number would jump to 114.8 percent under the more ambitious program proposed by the main opposition Democratic United Party. The public finance think tank warned that national debt could surge to as high as 156.4 percent of GDP by 2050 when considering the cost of bailing out ailing mutual savings banks, deficits at public companies and other public financial liabilities.
To avoid catastrophic consequences, the government would inevitably have to increase taxes to finance higher welfare costs. To keep national debt under 60 percent of GDP as prescribed by the European Union on troubled euro-zone peers, tax burden in proportion to GDP would have to be raised from 25.1 percent to 32.5 percent to accommodate the Saenuri Party’s welfare program and to 34.9 percent under the DUP plan. With the current tax burden just half of the European average of 43.8 percent, welfare benefits as promised by political parties would not be sustainable. With that fact understood, politicians supporting welfare should explain how and from whom they plan to collect more taxes.
The institute advises that to deliver welfare benefits, a universal and broad tax hike is needed. Hikes in corporate, income and financial income taxes suggested by politicians will hardly be enough. The institute recommended that value-added taxes or an increased sales tax are the most realistic options. But it would be challenging for politicians to take the political risk of raising sales taxes without meeting strong protests from consumers.
So, politicians are burying their heads in the sand and fooling voters with promises of creating welfare programs without higher taxes. Politicians must be more responsible in making campaign pledges. The National Assembly should institutionalize a system to review campaign platforms so that candidates and parties do not pump out unrealistic and half-baked ideas. The numbers show that it is a complete lie to promise welfare without increased taxes.