No free lunch
The author is the deputy editor of the economic policy teamof the JoongAng Ilbo.
The discussion on a second round of emergency relief grants has lost direction. It is no longer about whether the money will be paid or not. It is a given that the handouts will be disbursed after the start of what appears to be a second wave of Covid-19 in Korea.
Now the focus of the debate is when and how to offer the aid. The point is whether to give it to all or selectively. Ruling Democratic Party (DP) and opposition United Future Party (UFP) politicians are engaged in a mud fight over the issue. Over the nature of the emergency funding, UFP Rep. Yun Hee-suk called it a “relief,” while Gyeonggi Gov. Lee Jae-myung said it was an “economic policy, not poverty relief.”
There’s a reason that people add their opinions on the support fund. The influence of the emergency relief was proven in the 21st National Assembly election on April 15.
But they are all being vague about the source of the funds. It doesn’t rain cash. For the first round of grants, each household received 400,000 won ($337) to 1 million won, which cost a whopping 14.3 trillion won. Naturally, it comes from state coffers that should be filled with taxpayer money. Three supplementary budgets and the first relief grants totaled 59 trillion won — 37.5 trillion won of which was funded by issuing treasury bonds.
The same goes for the second round of disaster relief. Whether it is paid to all or selectively, it will cost several trillion won more. The country cannot afford to do it. Its remaining budget has already run out after three rounds of supplementary budgets. Every dollar in the second round assistance will be debt. Naturally, this will result in interest payments by the government. And that will directly translate into government debts when the interest should be paid with taxpayer money.
For citizens, it is not “emergency relief” but an “emergency loan.” Let’s not be tempted by words of politicians busy calculating votes. There is no reason to be swept up by favors through state funds instead of their own money. (It’s not like they’ll sell their houses and pay back the government debt).
Nobel Prize winning economist Milton Friedman is famous for saying, “There is no such thing as a free lunch,” pointing to lax government spending. Friedman made his name with his book “Capitalism and Freedom,” and also wrote “Free to Choose.” As the titles indicate, people are free to choose whether to support or oppose the emergency assistance. But you should know the truth when making a choice. A sentence from the book tells us the essence of the emergency funding.
“If you take money out of your left pocket and put it in your right pocket, you’re no richer.”