A simple matter of affordabilityPresident Park Geun-hye on Friday chaired a meeting to map out a plan to ensure integrity in public finance through a special act preventing misuse and squandering of tax funds. The act will include stricter guidelines based on the so-called “Pay-go” principle by stipulating cap on government liabilities, containing faster increase in expenditures than income, and requiring detailed financing outline when budgeting.
The direction is well-positioned, but whether actions can be followed remains questionable. Under the incumbent administration, the national coffers have been thinning fast. Over the last four years including this year, the government has not once maintained a surplus in the public finance. Liabilities surged by 95 trillion won ($83 billion) due to snowballing deficit, already exceeding the full five-year increase under former President Lee Myung-bak administration and nine-fold of the growth under President Roh Moo-hyun. National liabilities are estimated to reach 644 trillion won by the year-end, amounting to 40 percent of the gross domestic product for the first time ever. The government had promised to achieve balance in public finance by 2013 or 2014. But considering the welfare pledges made during the general election campaign and corporate restructuring agenda, public finance will likely worsen this year instead of getting better.
What the government proposes in hopes to achieve the goal is disappointing. The measures are what it has been saying to have done all along – scaling down government expenditures, realigning overlapping spending, and reducing tax deductions. What can dramatically aid public finance such as reform in public pensions and welfare spending is absent. The government also does not have any new ideas to bolster tax income. It obviously is bound by its stubborn dogma of improving social welfare without any tax hike.
The meeting first addressed the Nuri program – subsidized day care program that municipal education offices have been wrangling with the central government due to lack of funding. Public finance is wrecked whether the money comes from the state or local government budget. The people would have to compensate for the losses. But government offices are tossing the problem as to avoid direct accountability instead of addressing the problem within the context of national affordability. We seriously question if such leadership can pull our economy away from the dark path Japan had gone over the last 20 years.
JoongAng Ilbo, April 23, Page 26