Cash handouts a bad ideaThe idea of giving cash handouts to all citizens to compensate for losses suffered during the virus outbreak was floated by some local government heads. Former Prime Minister Lee Nak-yon joined the chorus. The Blue House and Finance Ministry struck it down, but politicians keep raising it ahead of the April 15 parliamentary elections. Instead of concentrating on quarantine actions as new infections popped up in Seoul, politicians are busy pitching a populist agenda to win votes amid growing discontent with the government for its handling of the epidemic. The figure, initially at 500,000 won ($420) per person, has doubled to 1 million won.
To give 1 million won to every one of the 51 million population, 51 trillion won is needed. South Gyeongsang Gov. Kim Kyoung-soo proposed that the money be paid out from the government coffers and later be retrieved through taxing the rich. How could he make such a casual comment when the government’s tax collection was 600 billion won less than a year ago? How can the government collect more tax when the virus outbreak has affected the lives of everyone in the country?
The government simply cannot afford a 51 trillion-won handout. Due to the shortage in tax revenue, the government already must issue 70 trillion won in debt this year alone. If it has to issue another 51 trillion won worth for the cash token, a new offering of 120 trillion won could inundate the bond market and affect other financial markets. The idea of handing out 51 trillion won is like using a credit card when cash is short.
Giving out disaster compensation to everyone is of no use. Some people would use it elsewhere or put it in the bank. There are other ways to help the needy — through basic public pensions or tax credits on earned income. Unemployment subsidies are also being paid out to a maximum of nine months. Last month, the payout reached 800 billion won.
Instead of mouthing generosity, practical aid should be given. Merchants and small- to mid-sized companies have to wait months to have their loan documents reviewed by banks. Although the supplementary budget has been packaged at 11.7 trillion won, only 300 billion won goes to the credit insurance fund that backs bank loans to small merchants. The National Assembly must cut one-time spending and instead increase funding for businesses. Turning to populist platforms as election day nears cannot help the battle with the new coronavirus outbreak. The legislature must examine the supplementary budget outline so that money is well spent and goes to the people in need.