Splurging before the electionFiscal addiction refers to obsessive institutional borrowing and spending. As with alcohol and drugs, resorting to borrowing and spending can be compulsive and unrestrained. Under the Moon Jae-in administration, supplementary budgets were drawn up and executed four times in 2020 and twice in 2021. The extra spending was necessary to fight the Covid-19 pandemic, but some of them had a populist motive as the universal handout of 14.3 trillion won ($12 billion) in 2020 and the first supplementary budget approved in March this year were timed with a major election.
The country passed another record-sized budget for 2022 in December. And yet, political parties are floating the idea of another budgetary increase even before the ink of the huge budget is dry. After the ruling Democratic Party (DP) raised the issue, the opposition People Power Party (PPP) are supporting it to pass the bill in February shortly before the March 9 presidential election.
A resort to supplementary budgeting was an annual ritual under both the liberal and conservative governments. An annual budget rarely ended in the original size. The scope and frequency deepened under the Moon government. Parties must stop themselves before they push ahead with the plan. A supplementary budget in February which will be the first of its kind in terms of timing is controversial for its timing ahead of the presidential election in March.
As supplementary budgeting had been too frequent, another one in February is too hasty. What serious events have happened for changes in the budget scheme that passed the legislative review in December? A supplementary budget must be deliberated on when there is a clear reason. Politicians point to the resurgence of Covid-19, but the hardship of merchants and the self-employed has been ongoing for two years. The government planned the budget poorly or the political front is being too reckless about spending.
A supplementary budget is not always necessary when an unpredictable event arises. There are other ways to create new spending by using reserves or moderating existing budget details.
The government so far is against the political move. It argues that the damage on consumption from the resurgence is not as serious as in the early stage of the outbreak.
The government cannot create spending every time money is needed. Bureaucrats in the past clearly drew the line. Former Deputy Prime Minister for Economic Affairs Kang Kyung-shik used to say that budgeting is a “fair distribution of complaints.” None can be happy if the government tries to please everyone with restricted resources. But the finance ministry has lost all of its past resolve to defend fiscal health.