An irresponsible governmentThe government has proposed a budget of a record 604.4 trillion won ($520 billion), an 8.3 percent increase from this year’s original budget, excluding the sum of supplementary budgets. It is the first time the original budget will exceed the threshold of 600 trillion won. The Moon Jae-in administration will be keeping up an ultra-expansionary streak to fight Covid-19 and compensate for policy failures throughout the five-year presidential term. Next year’s budget should be financed by issuing 77.6 trillion won in government debt.
That makes national liabilities reach a whopping 1,000 trillion won, accounting for 50.2 percent of the gross domestic product. In the meantime, revenue for next year is projected at 548.8 trillion won. The gap between revenue and expenditure is getting wider just like a yawning alligator jaw. This year’s tax revenue was more than expected thanks to hikes in real estate prices. But the same result cannot be certain in 2022 after the central bank started to raise interest rates.
The Moon government has been heedless in spending. The scope and pace of debt increase has been overwhelmingly steeper than with past governments. The increase in the original budget over the five years of the Moon administration will be 50.84 percent, compared with gains of 32.97 percent under President Lee Myung-bak and 17.11 percent under President Park Geun-hye. Stimuli is necessary, but the spending by the Moon government is overly lavish due to its populist projects that will take off in 2022, the year of the presidential election.
Welfare expenditure was earmarked at over 200 trillion won with 23.5 trillion won targeting young people who had turned their backs on the ruling party in the last mayoral by-elections in Seoul and Busan. If the spending goes to caring better for the needy and creating quality jobs, that will be welcomed. But much of the projects are one-off spending.
The Moon administration has spent an enormous amount of money to create short-term jobs and expand unemployment subsidies to compensate for its failures in economic policies under the income-led growth. Instead of prioritizing and rationalizing spending, it squandered money.
The government stayed heedless to cautionary advice. Next year’s budget even proposes to subsidize a half of university tuition for students of middle-class families and hand out 200,000 won to every youth in the low-income class to help them pay their monthly rent. The move won’t help them greatly and only use up huge tax reserves.
The government vows to lower its budget increase to below 5 percent from 2023. After reckless spending, it is telling the next administration to tighten its belt. Debt-financed spending will only increase the burden on taxpayers and the future generation.