Yet another budgetThe government and politicians are talking of a fourth supplementary budget amid the longest-ever rainy season. Ruling Democratic Party (DP) Lee Hae-chan proposed a meeting with the government as soon as possible to discuss an extra budget to expedite rescue and relief in flood-hit areas. The opposition suggested it would back the plan. The government in principle is administering spending through reserve funds, but at the same time studying the option of issuing yet another budget. The last time the country sought four additional budgets on top of the original budget in a single year was in 1961.
A natural disaster that has caused a huge number of casualties and severe damage calls for emergency budgeting. The reserve balance has just 2 trillion won ($1.7 billion) left due to spending over coronavirus relief. If deemed necessary, the government and politicians must expedite the new spending plan.
Spending should go where it is needed. Authorities must be extra careful in devising the spending plan to deliver timely and effective relief. But given the track record, it not clear they have the skills. The government has packed nearly 60 trillion won into three extra budgets to fight the coronavirus crisis. The debt to gross domestic product ratio has hit an all-time high of 43.5 percent. National liabilities could top 1,000 trillion won.
Most of the debt financing has been wasted in cash or subsidy handouts. The government has extended the coronavirus relief fund to every household instead of the original plan of giving it out to 70 percent of the households with the lowest incomes. Most of the budget to create jobs went to temporary hires. Local governments also went on spending sprees. They have rolled out relief funds recklessly without leaving any emergency funds for natural disasters. Most of the local governments must rely on central government aid to address disasters.
When concerns were raised about the expansionary spending in December, the then presidential spokesman said that crop stocked up could rot. But the national coffers may have nothing left to rot in the face of the virus and natural disaster double whammy. There is still lot to spend to prop up the economy from virus setbacks and finance the New Deal projects. The government no longer can afford to waste any more money.