Cut the fatThe government has passed its “super budget” for fiscal year 2017, which exceeds 400 trillion won ($357.9 billion) for the first time. As expected, it approved of all types of pork-barrel expenditures in the run-up to the 2017 presidential election. Despite the Ministry of Strategy and Finance’s explanations, the government cannot avoid criticism that it based the budget on overly optimistic forecasts by global think tanks that our economy will grow by 4.1 percentage points next year.
Nowhere are there grounds for a recovery in the global economy. The government tried to increase next year’s budget by less than 3 percentage points compared to 2016. But the increase soared to 3.7 percent after the government’s consultative meetings with the ruling party. The increase also reflects the government’s expectations for a continued increase in tax revenues as in the first half of the year.
The government says next year’s budget is at an appropriate level. But the increase in tax revenues in the first half lost steam in July and August. If the economy continues to slow down coupled with less-than-expected tax revenues, next year’s budget will be off kilter.
Finance minister Yoo Il-ho said the government drew up an expansionary budget due to our economic slump. But if you look into the budget, it is full of projects calling for a hefty fiscal inputs. Government officials across the board were all busy lobbying the finance ministry to secure their budgets for next year.
The 2017 budget also exposes a critical lack of investments in revitalizing our growth engines. For instance, the government cut the budget for the industrial and energy sectors despite the need to breathe life into our lackluster economy. It raised the welfare budget to a whopping 130 trillion won — nearly 32 percent of the total.
As a result, the share of government debt to our GDP has surpassed 40 percent for the first time. If you add government debt from civil servants and veterans pensions to that, the nation’s debt escalates to an astronomical level. The National Assembly must not approve the hefty budget if it really cares for the future of our country. Lawmakers must get the fat out of the budget and restrain from lobbying for pork-barrel projects. Otherwise, the government again will be forced to draw up a supplementary budget next year.
That’s a short cut to the kind of chronic fiscal deficits we see in Japan. The government must not transfer the debt bomb to our next generation.
JoongAng Ilbo, Aug. 31, Page 34