Handout politicsContestants have begun lining up ahead of the Apr. 7 Seoul and Busan mayoral by-elections. Under the pretext of Covid-19 relief, the ruling Democratic Party (DP) is trotting out various fiscal spending schemes to buy votes. Their outlines in the spending are mostly aimed at wooing voters rather than fighting the virus fallout. The DP has benefited most by securing 180 seats out of the 300-member National Assembly during the April 15 parliamentary elections last year after the government vowed universal relief check handouts.
There is no mechanism to put the brakes on reckless spending. The opposition People Power Party (PPP) lacks seats to stop the DP and also cannot outright oppose such relief packages in fear of losing votes. The PPP also fails to provide an alternative policy solution.
Deputy Prime Minister and Finance Minister Hong Nam-ki said fiscal spending cannot continue to serve as priming water, but to no avail. Hong repeatedly expressed concerns over the impact on fiscal integrity from fiscal expansion, but nevertheless went along with the DP’s demands.
Due to the weakening of the PPP and Finance Ministry, the DP has been unstoppable. Over the last two weeks, all possible fiscal actions have been tabled.
The ruling party and government are considering bills to force lucrative companies to share their profits with troubled businesses during the hard times from Covid-19, subsidize losses for self-employed business and create a social fund to finance reliefs through the legislation in February.
Aspirants for next presidency from the DP are vying with bolder spending plans. Gyeonggi Gov. Lee Jae-myung is handing out another round of relief checks to every household in his jurisdiction and DP Chairman Lee Nak-yon pushed ahead with a profit-sharing scheme and Prime Minister Chung Sye-kyun a subsidy plan.
The ruling front cares little about the expected massive damage on fiscal integrity and indebting future taxpayers, as it is entirely to engrossed to winning votes.
The subsidy scheme proposes to aid 7 million self-employed whose business suffered big from months of social restrictions. Although relief for their desperate conditions is needed, more study should be given to the effectiveness in aids. The ruling party estimate about 2.4 trillion won ($21.8 billion) in monthly spending to cover up for their losses. Fiscal deficit already ballooned to 90 trillion won last year. Why the subsidy should be stipulated into a law instead of offering a temporary aid requires more deliberation.
The fairness in setting who gets how much also must be ensured. The same goes for other legislative proposals of offering tax deductions if large companies share their profits with smaller companies or creating a social fund out of government funds and corporate donations. Aids must be devised for practical help, not to buy votes.