Spending wiselyKorea’s fiscal spending for next year has passed the milestone of 600 trillion won ($515 billion). The rivalling parties agreed to a 607.7-trillion-won budget for 2022 on Friday, a day after the Dec. 2 deadline. Before President Moon Jae-in took office in May 2017, the budget for the year was 400.7 trillion won. Under his reign, government spending has increased more than 200 trillion won. Budgeting has been mega-sized to help fight the Covid-19 pandemic on top of a surge in welfare cost.
On the tax-paying end, people are uneasy about the outstanding growth in government spending. Despite colossal spending, people’s lives have not improved and the economy is still lackluster with foggy prospects. Some feel their taxes are feeding a bottomless well. The government has become spendthrift from the surge in tax revenue after a jump in property prices in spite of ballooning national liabilities. If spending helps the economy, it will be good. But under the current situation, that would be just wishful thinking.
Prices have been soaring from instability in the global supply chain. The U.S. Federal Reserve signaled a faster timetable in rate increases upon finding broad price rises across the economy. The consumer price index in November jumped 3.7 percent in Korea, the highest in nearly 10 years. The third-quarter national income data showed shriveled spending by consumers and corporates. The shadow of stagflation will likely persist.
The budget for next year must be well spent to stimulate growth during emergency times. Whoever becomes the president next year, the administration must keep close watch over the spending. Many areas of the budget have populist features targeting the March 9 election and the June 1 local elections. The need for issuing 30-trillion-won local currency and various cash handouts raises questions. If business strains are protracted through the spread of the Omicron variant, another round of supplementary budget can be discussed.
But Korea cannot afford further extravagance. The economy under the Moon administration ran at an average of 1.63 percent as of last year. But fiscal spending increased 8 to 9 percent. National liabilities would reach 1,070 trillion won next year, compared to 600 trillion won in early 2017. Debt against the GDP will hit 50 percent. As spending increased at every election season, the incoming government must streamline spending in executing the money to raise efficacy and use extra funds to promote corporate innovation and hiring to help vitalize growth.