Pass the supplemental budgetPark Ki-choon, floor leader of the Democratic United Party, indicated the main opposition party may oppose the government proposal to fund a supplemental budget through issuance of government debt “unless the government has a plan to restore fiscal health.” Choi Jae-sung, a member of the Special Committee on Budget and Accounts from the same party, has joined the chorus by suggesting a need to raise taxes to cover the supplemental budgeting.
There is nothing wrong in the DUP’s arguments. The government would have to come up with means to restore public financal integrity when issuing new debt. But the opposition party doesn’t have grounds to oppose the supplemental budget. The extra budget is sought to cover the tax revenue shortfall due to the economic slowdown and increased welfare costs. The government needs to put in 1.05 trillion won ($957 million) to finance free child care, 1.025 trillion won to subsidize reduced university tuitions and more than 1 trillion won to fund free school meals. All these extra welfare costs are by-products of the rivalry between the ruling and main opposition parties in the last presidential campaign.
Any tax increase should be dealt discreetly. It cannot be negotiated in association with a supplemental budget that needs to be enacted immediately to run government programs and boost the economy. Various public discussions are needed to contemplate which rates among income, value-added and corporate taxes have room for increases. The DUP’s proposal to fix the income and corporate taxes may be motivated by its campaign promise to levy higher taxes on the wealthy. We suspect the DUP may have other political motives for raising issues on fiscal health.
The economy is teetering toward dangerous levels. Fiscal stimuli are needed right now to boost the slow-moving economy. It is why most people support the idea of raising government debt to increase the budget.
The government also must be more frank with the legislature and public. It cannot rely on debt issuance every time it needs new funding for increased welfare costs. The extra spending cannot be financed simply through revision in tax codes and reduced expenditures. Without raising taxes, it cannot guarantee public financial integrity. But for now, the government and legislature must concentrate on passing the supplementary budget bill. The government also should come up with a comprehensive and long-term plan to improve public finances.