Barely in commandIt is never easy to be in charge of economic policy. So reserve some sympathy for Deputy Prime Minister and Finance Minister Kim Dong-yeon. “I went to an event one time, and everyone offered words of comfort to [Kim] saying how it must be tough to be in his shoes,” one former bureaucrat recalled.
Kim is the top policymaker on economics — or is supposed to be. “In reality, he is at the bottom of the government’s economic team,” the retired official observed.
He had his reasons to believe so. Soon after his appointment last July, Kim declined to comment on the idea of increasing taxes on the rich, which was floated by the ruling party. “The issue is very sensitive,” he said. But the maximum income tax rates on individuals and companies were raised to 42 percent and 25 percent, respectively.
That went against the trend in other advanced economies where corporate taxes were being shaved to keep companies from going overseas, thereby saving jobs. Kim Boo-kyum, minister of the interior, who was recruited from the ruling Democratic Party, challenged the deputy prime minister in a cabinet meeting.
Kim questioned the financing of the 178 trillion won ($166 billion) spending plan by President Moon Jae-in to fulfill his campaign obligations during his five-year term. “Some of the funding ideas the fiscal authorities have laid out are not convincing,” he said.
Other controversial measures went through the same ritual: the party or presidential team made the decisions and the finance minister followed their orders and cleaned up any mess that was created by them. Last year, Kim repeatedly denied the government was considering raising property ownership taxes as a means of reining in real estate speculation.
But the government said it could consider revising the property ownership tax in this year’s economic policy outline. Its decision is expected around August. Moreover, the finance ministry lost say over property ownership tax. A special committee on public finance reform set up by the planning board that oversees the 100-point agenda of the Moon administration is in charge of any changes to the tax system. The finance ministry takes part through the dispatch of a budget chief and working-level official on the special committee.
Real estate policy is also beyond the jurisdiction of the deputy prime minister for the economy. Kim Soo-hyun, senior presidential secretary for social affairs, has been spearheading real estate measures. He declared a war on apartment prices in the Gangnam district of Seoul “till the end.”
Real estate, which involves the financial sector and home supplies, has been traditionally the responsibility of the deputy prime minister for the economy. The economic chief coordinates with the top financial regulator, the Financial Services Commission, and the Land, Infrastructure and Transport Ministry, which oversees housing supplies.
But a presidential aide with no financing or housing background is in command of real estate policy.
After a backlash on Moon’s campaign pledge to raise the minimum wage by 54.5 percent to 10,000 won ($9.40) within three years, Kim hurriedly pulled together a 3 trillion won program to subsidize small employers forced to pay considerably more to their workers. As a result, Seoul took the rare administrative action of paying extra wages for workers through tax funds. Economic policies are run by presidential secretaries and politician-turned ministers, while Kim acts as their puppet.
There is no place for a veteran bureaucrat while theorists in the Blue House pursue policy experiments.
Still, many credit Kim for keeping the economy running smoothly against multiple headwinds at home and abroad. Long gone are the days when the deputy prime minister acted as a figurehead, receiving reports and taking credit for what ministers had done.
Kim stands tough amid aides and ministers handpicked by the presidents. In a cabinet meeting on external economic affairs, he declared the government will decide whether to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade deal within the first half of this year. In another meeting on corporate competitiveness, he stuck to a no-bailout principle for two troubled shipyards, Sungdong Shipbuilding and Marine Engineering and STX Offshore and Shipbuilding.
Yet, he could do better. As a budget expert, he should know better than to resort to a supplementary budget to make up for policy failings. Kim spoke of increasing spending on top of the already record-high 429 trillion won in this year’s budget to address youth unemployment.
The government’s economic slogan of growth led by jobs was shaken by February jobs data that showed an eight-year low in job additions and 1.26 million unemployed. The government is once again turning to makeshift solutions instead of deep soul-searching and fundamental changes. Not surprisingly, the move is suspected to be aimed at getting votes in June’s local elections. In order to make the Korean economy run well, the finance minister must be encouraged to wield full command of the economy.
JoongAng Ilbo, March 16, Page 28
*The author is an editorial writer of the JoongAng Ilbo.