Ignoring the debt
The author is an editorial writer of the JoongAng Ilbo.
Korea’s state budget is expected to break 500 trillion won ($429.4 billion) for the first time next year. But the general public doesn’t seem to care. That is wrong.
Let’s go back to 2013, when the country tried to make changes to year-end income tax settlement. Under the previous system, high-income earners received more exemptions than average earners. Under the new plan, however, the higher your income, the higher tax you needed to pay. That immediately triggered strong resistance from those in their 40s and 50s. The government stepped back. It went so far as to expand the scope of income tax exemptions to ease their outrage. That is why eight million salaried people still don’t have to pay any income tax.
When Deputy Prime Minister for the Economy and Finance Minister Hong Nam-ki tried to reduce tax refunds on credit card spending earlier this year, the middle class fumed. Assuming that the public sentiment would affect next year’s general election, the ruling Democratic Party nudged the government to retract the policy — it eventually did. People were sensitive about the issue because they were worried about losing even a single coin at a time when they did not know how long they could keep their current jobs or how they could afford life after retirement as the economic slump continues.
Government officials and politicians know public sentiment very well. They cancel benefits, yet they don’t hesitate to spend taxpayer money because they are aware that people don’t complain as long they don’t have to open their wallets.
Where does the 500 trillion won budget come from? It comes from taxpayers, from the value added tax and the corporate tax.
What’s so serious is that government officials and politicians are increasingly addicted to fiscal solutions. Unsatisfied with the 500-trillion won-budget, the government has introduced a supplementary budget. National bonds will cover 3.6 trillion won of the supplementary budget. Korea has accumulated 681 trillion won worth of government debt.
People respond to tax refunds on their credit card spending even though the benefits are minimal, but no one takes issue with the 500 trillion won budget because they erroneously think it has nothing to do with them. But the 500 trillion won comes from everyone.
The result is the tragedy of the commons. People think they’re unrelated to the issue so government officials and politicians go off spending taxpayer money however they like. Supplementary budgets have become an annual event for the Moon Jae-in administration, which first sets the total sum and then looks for ways to spend the money.
Pointing out that Korea Inc. is losing the steam, the International Monetary Fund (IMF) advised the country to invest finances in a way that will improve its potential growth rate. In reality, the government is pouring taxes into short-term stimuli measures such as part-time jobs in the public sector.
As next year’s general election nears, the government and ruling party are going all-out on pork barrel projects. They already promised 17 cities and provinces a total of 410 projects worth 134 trillion won. Koreans in their 20s and 30s will have to face the results: a country with huge debts.
JoongAng Sunday, May 4-5, Page 30