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Agonizing over relief

Published: 07 Apr. 2020, 19:52

Lee Sang-ryeol
The author is chief editor of content production at the JoongAng Ilbo.

Spring is the cruelest month, the poet wrote, and particularly this year. The weak are either dying from coronavirus or hunger. Countries around the world are undergoing suffering like they’ve rarely experienced before.

We are going through a surreal moment in which the U.S. president predicts 100,000 to 240,000 deaths in the United States as a best-case scenario, and 1.5 million to 2.2 million in the worst case. He pleads for “sacrifice” and “patriotic duty” and tells his citizens to brace for tougher days ahead. The head of the IMF somberly observes: “Never in the history of the IMF have we witnessed the world economy coming to a standstill.”

The toll on our economy will inevitably be bigger than the crises in late 1997 and 2008-2009. Over the last two weeks, 10 million Americans lost jobs — almost as many as over the span of six months in the 2008-2009 meltdown. The grim prediction of unemployment hitting 30 percent — that’s three out of 10 Americans losing their job — as a result of the Covid-19 outbreak may come true.

The situation is equally challenging in Korea. Employees at both small and big companies are being asked to go on unpaid leaves or retire early. According to the Korea Economic Research Institute, sales at fashion retail shops for February and March were projected to have plunged 85 percent. The fall is around 65 percent for restaurants. We can’t tell yet how low the economy will sink.

The Covid-19 pandemic has put governments around the world to an extreme test. They must fight to find medical supplies like respirators and even the humble face mask. The crisis will end after the global markets return to normal. The Korean economy hinges on a recovery in U.S. and European markets.

The crisis has exposed the competence — or lack of it — in each governing power. The payout of disaster relief will be the next barometer for the Moon Jae-in administration after a mask shortage. The 9 trillion won ($7.4 billion) fund will be given out to individuals. It could provide helpful relief to many households and stimulate the consumer market. But an ongoing controversy raises the question of whether the spending can generate the desired effect.

The plan has caused fissures in the leadership. President Moon Jae-in said he would do his best to have a supplementary budget pass the legislature after the April 15 election and the aid paid out by mid-May. But the opposition is opposed to the idea of paying out a maximum of 1 million won to households in the bottom 70-pecent income bracket. The plan will not work if it cannot gain support from the opposition front. Will Moon blame the opposition if the government cannot pay out in time? Why didn’t the ruling party line up the cooperation of the opposition in advance before making its pledge to the people? Was the generosity aimed at merely winning votes in the April 15 general elections?

The United States has acted differently. Although the Democrats hate Trump to the point of seeking his impeachment, they willingly negotiated with the Republican Party over a relief budget. Despite a hiccup in the Senate, a bipartisan agreement was reached to hand out $1,200 to every American citizen. The disease disaster cannot be fought if rival parties do not stand on the same side. A leadership that does not have bipartisan support cannot combat the crisis.

Populism also has played a negative role. The government had not even decided the guidelines on handing out the money when announcing its plan. After a wave of protests and complaints, the ruling Democratic Party suggested giving money to everyone. The powers that be are making fast tweaks to a plan that involves billions of dollars. How the government will come up with such money remains uncertain. If it planned to hand out the money by mid-May, it should have drawn up a funding plan and guidelines for payouts before it made the pledge. Government officials are in a confused state and the fiscal balance is being wrecked.

Such near-sighted policy-making can worsen the crisis. A handout of 1 million won per household is not small money. Does the government think everything will return to normal in one or two months? The pain must be harsher on the poor. Unemployment could surge. Aid should be designed to help the weak.

The controversy over relief has escalated because the government and ruling party have no respect for the money taxpayers have contributed. Tax revenues should not be treated as a piggy bank by the powers that be. There is no such thing as a free lunch. The relief fund cannot be free. The bill will eventually be paid by the taxpayers.