Dangerous profligacyThe budget for 2021 raises skepticism if such reckless planning would have been possible if it came out of pocket. In a rare and easy bipartisan approval, next year’s budget has been set at 558 trillion won ($507 billion). That would be enough to build 45 Gyeongbu Expressways that connect Seoul to Busan at a cost of 12.2 trillion won. At least the Gyeongbu Expressway served the economy well.
The 2021 super budget does not show any sign of deliberation on the efficacy or prioritization. It only reflects deepening fiscal reliance. Welfare spending makes up the bulk of 200 trillion won. The government has spent over 100 trillion won over the last three years on temp jobs for precarious tasks to bolster employment figures. But employment and income disparities only worsened.
Profligacy without respect to efficiency has rapidly damaged public finances. National liabilities will surge to 956 trillion won next year, snowballing by 150 trillion won from this year’s original budget. The debt-to-GDP ratio will also stretch to 47.3 percent, far over the 40 percent threshold the government long struggled to defend.
The government’s policies — from minimum wage hikes and a shortened workweek to real estate measures and forced conversion of contract workers to permanent payrolls — have caused serious side effects. Even in hard times that call for strict financial management, the government and politicians have been carefree in spending. Since the outbreak of Covid-19, the country has raised supplementary budgets four times. Relief funds were doled out without discretion, worsening the financial state. This amounts to a moral hazard by fiscal authorities.
The government claims fiscal spending should be priming water during hard times. But spending far exceeds the growth. The annual growth rate has slowed to around 1 percent, but fiscal spending has increased 8 to 9 percent over the last three years. Populist pork-barrel projects like Gadeok Airport construction have been railroaded even though their worthiness is questioned. The main opposition joins the populist campaign after witnessing how it had helped the ruling party in winning votes.
The opposition People Power Party has not opposed the Gadeok project and even went ahead to propose a third relief fund handout. It also vied with pork-barrel project recommendations. If politics has lost good sense, the people must stop it. Or our younger generation could face a fiscal and default crisis.