Get the economy back on track

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Get the economy back on track


A month has passed since the Park Geun-hye administration set sail. But the people on the ship cannot overcome their nerves. Whether they voted for Park or not, all Koreans are hoping that the new government will manage the country well and make their lives easier. Her critics as well as the opposition aren’t opposing her policies or nominated candidates for government posts simply out of ill intention.

Park’s approval rating has already dipped. The decline suggests many are questioning the government’s capabilities regardless of their political preference. The president and her government lost face due to a series of appointment mishaps. But the larger reason is that her government does not seem to improve.

The government’s clumsiness and incompetence are best underscored in its economic policies. Putting aside a lack of political leadership demonstrated in her appointment flops and delayed legislative approval of her government reorganization plan, policy failures could dog and stigmatize the new administration.

Upon inauguration, Park promised to create an “inventive economy” and fulfill campaign promises regarding welfare benefits. Bureaucrats glossed over her intentions and sang the chorus on “inventive economy.” They now apply the adjective “inventive” or “creative” to every area - diplomacy, education, culture, welfare, tourism, jobs and labor relations. The concept is so broad and vague that even the ministry in charge of spearheading it - the Ministry of Science, ICT and Future Planning - cannot explain exactly what it means.

But the government soon found out that the economy requires emergency measures much more than creativity. It slashed this year’s economic forecast to 2.3 percent from 3 percent estimated three months ago. A sharp slowdown could lead to a critical shortage in tax revenue, sluggish employment, investment and consumption and further drag down the economy. There would be little left for the economy to turn inventive.

Faced with such a critical state, the government should place a top priority on rejuvenating the economy. The transition committee and appointed top government officials could not have been so foolish to have missed the signs during the transitional period. If they did, they are unqualified for their positions. And they are equally unqualified for their role if they didn’t report the truth to the president.

While the government was wrangling over the definition of “creative economy,” its economic department announced that the economy is worse than previously expected. It argued for a large-scale supplementary budget in order to jump-start the economy. It also unveiled all-out stimuli measures to revitalize the dead housing market.

But their announcement amounted to no more than rhetoric. It failed to articulate how much is needed and when as well as what growth target it holds through the budgetary increase. The president, meanwhile, remains in her isolated palace repeating her mantra on inventive economy, jobs and welfare benefits, which she still seems to believe could come without any tax revisions.

Out of the 15 trillion won ($13.4 billion) the economic team aims to secure through the supplementary budget, only 3 trillion won would be spent to aid the economy. The rest would cover the gap in tax revenue as less taxes are expected to be collected from last year’s estimate due to the economic slowdown. The budgetary increase - which could be one of the largest-ever - would merely be a stopgap to make up for tax revenue shortages. The economy, meanwhile, would continue to suffer without any meaningful aid. Even if the tax shortfall is somehow accounted for, there remains no means to fund the president’s costly welfare scheme. The government hopes to dig up the underground economy and save in expenditures to raise the 27 trillion won a year that’s necessary to finance new welfare plans. But few believe that will be possible. With or without a supplementary budget, public finance as well as the economy will be wrecked if the government agrees to all of the president’s welfare pledges. But no one in the cabinet or presidential office is willing to blurt this out to the president.

All this talk on inventive economy and campaign promises are in vain if the economy doesn’t recover. If campaign promises are not attained and the economy sinks - regardless of increasing the fiscal deficit - people will become more resentful. The opposition and some of the ruling party members are equally irresponsible for calling for tax hikes to vitalize the economy and honor welfare promises. To collect more taxes and increase debt in order to enhance social benefits would be suicidal.

The government has one choice to ease public jitters and save the economy. It must tell the truth about the economy to the people and that it cannot afford the social welfare plans the president had promised. And then it should do everything it can to get the economy back on its feet.

By Kim Jong-soo

* The author is an editorial writer of the JoongAng Ilbo.
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