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Toward affordable welfare

Published: 16 Sep. 2013, 21:31

The Ministry of Strategy and Finance has sent two significant signals about the future of our welfare system. First, the ministry’s head Hyun Oh-seok said yesterday that the administration’s welfare budget for the next year would exceed 100 trillion won ($92.5 billion), taking up the largest share of the entire budget. That heralds a remarkable transition from low-budget welfare to medium-level welfare. The other signal came from Hyun’s admission to a lack of revenues for the greater welfare benefits and a confession that a consensus needs to be reached over how big a tax increase is required if additional fiscal resources are needed. Although he didn’t use the phrase “tax increase,” he signaled de facto tax increases.

We must find ways to afford an era of more than 100 trillion won welfare budgets. Welfare expansion calls for more money. But the government can hardly persuade taxpayers with the simple logic that you should pay more tax if you want more welfare benefits given an apparent public resistance to tax increases. The government must first make the effort to reduce its budget waste as much as it can. A mere curtailment of the budget for social infrastructure and a freezing of civil servants’ wages are not enough.

The government should also drastically shift its policy direction from “universal welfare” to “selective welfare.” As it turns out, the administration’s indiscriminate push for free school lunches, day care allowances and basic pensions for senior citizens have caused tremendously negative side effects. The government must approach the issue with the philosophy that it should spend its limited budget efficiently along with efforts to realign the priority of its welfare commitments.

Of course, reducing government expenditures has a limit. That’s not enough to cover President Park Geun-hye’s massive welfare pledges amounting to 135 trillion won in the central government’s budget, aside from 124 trillion won in campaign promises for local areas. Though the government vowed to reconsider its plan for tax increases and also uncover the underground economy, it cannot meet the growing demand for more welfare spending. If so, the government should admit to the inevitability of a certain level of tax increases.

And it must come up with realistic and substantial alternatives to its previous insistence on “welfare expansion without a tax hike.” It must present a more reasonable road map for maintaining a fairer tax system. Above all, the government must first hammer out a national consensus if it really wants to achieve an affordable welfare society.