Runaway budgetCan a country be so carefree about multi-billion-dollar spending? Kim Tae-nyeon, floor leader and acting head of the ruling Democratic Party (DP) demanded on Wednesday the supplementary budget be approved within the day so that the fourth disaster relief fund could be handed out within the month. The first supplementary budget for this year is sized at 15 trillion won ($13.3 billion). It is true that the self-employed and socially-weak class need relief as fast as possible so that recovery can come sooner.
The budget has been excessively stretched ahead of the Seoul and Busan mayoral by-elections. The DP-dominated legislature yanked up the budget by 3.9 trillion won despite the opposition’s criticism about the helicopter money to buy votes. It pays little heed to worsening fiscal conditions. Due to the government’s lavish spending to increase jobs and welfare benefits, spending has exceeded income. A company or individual would check itself and stop to avoid bankruptcy, but the government can issue national bonds to come up with the funding.
The deficit in the combined public balance, including social security funds, will reach 89.6 trillion won after the latest budgetary increase, tantamount to 4.5 percent of the gross domestic product. When excluding social security funds, the public finance account will incur 126 trillion won in red figures, which is 6.3 percent of GDP. The deficit will widen if the government chooses to give out universal “comfort” money to each citizen as the president suggested. National liabilities will reach 1,000 trillion won, putting debt size near half of the GDP.
The ruling front still claims the country’s public finance is solid compared to the other members of the Organization for Economic Cooperation and Development (OECD). But experts disagree. A report from the Korea Institute of Public Finance and economists like Kim So-young and Ahn Dong-hyun of Seoul National University warn that comparing Korea with the U.S. and Japan with internationally-tradeable currency can be gravely dangerous.
Other countries also have been carrying out massive spending to fight Covid-19 fallout, but no fiscal plan is so heedlessly rubber-stamped at the legislature as ours. The U.S. has passed a $1.9 trillion stimulus package only after close examination and endorsement by the opposition. German Chancellor Angela Merkel laid out a roadmap to normalize fiscal balance after heavy spending plan so as not to translate the burden on the future generation. Even with an election ahead, a spending plan must not be breezed through without proper examination. Otherwise, the ruling party cannot evade criticism of trying to buy votes.