Mere stopgap measuresThe government on Tuesday presented the directions for our economic policy for the second half of the year. It lowered our growth potential to 2.8 percent and plans to spend approximately 20 trillion won ($17 billion) more, including 10 billion won in supplementary budget. The government also will push forward tax refunds for high energy-efficiency electronic products and toughen restrictions on loans for real estate purchases to cool the overheated market. Deputy Prime Minister for the Economy Yoo Il-ho said the stimuli package is aimed to minimize the impact of restructuring and shoring up employment.
We understand the need for supplementary budget. The World Bank lowered its forecast of global economic growth by a big margin — from 2.9 percent to 2.4 percent — on June 7. Coupled with low oil prices, slowed Chinese economy and potential interest hikes by the Fed, our economic recovery is very slow. The Brexit factor makes it worse together with the massive joblessness and prolonged recession due to the government’s restructuring of the insolvent shipbuilding and shipping sectors.
But the prescriptions seem overly passive and defensive. The 10 trillion won in supplementary budget comes from taxes the government expects to collect more than scheduled this year. In other words, it is not the money the government will get after issuing national bonds. The effect of such passive fiscal input will be minimal.
We can hardly find effective solutions for our alarming polarization of wealth and rapidly aging populations — fundamental problems our economy faces — not to mention a critical lack of substantial recipes for housing and employment for our younger generations. Only stopgap measures are found instead of fundamental solutions like a drastic increase in housing supplies. Such short-sighted — and half-baked — policies without far-sighted visions for the future simply do not work.
A habitual resort to supplementary budget also rings alarm bells. The Park Geun-hye administration has drawn up such a budget every year over the last four years, except 2014. Public distrust in the government’s ability to predict economic cycles and execute policies grew while analysts increasingly express concerns about the consolidation of a structural low growth. Criticizers attack the administration for its wrong directions and strategies. Deputy Prime Minister Yoo suddenly flip-flopped on an earlier pledge not to turning to a supplementary budget.
Once the government has changed its position, the National Assembly must approve the supplementary package quickly. They also must refrain from pork-barrel projects for their constituencies. The government must listen to constructive criticisms as well. With global political and economic uncertainty rising, our politicians must demonstrate a spirit of co-governance beyond myopic pursuit of partisan interests.
JoongAng Ilbo, Jun. 29, Page 30