When the bills come dueIn answers to a question from the Korea Manifesto Center, ruling Democratic Party (DP) presidential candidate Lee Jae-myung said more than 300 trillion won ($250.7 billion) will be needed to finance his campaign promises for five years if elected while his rival Yoon Suk-yeol from the opposition People Power Party (PPP) came up with the figure 266 trillion won. The DP projected that much money would be needed to implement Lee’s more than 270 pledges, including aid to small merchants struggling to survive the Covid-19 pandemic.
However, the DP could not present the numbers in detail. The PPP also broadly estimated 266 trillion won will be needed to implement Yoon’s campaign promises, including 50 trillion won to deal with the pandemic and 25.5 trillion won to raise soldiers’ pay. The minor opposition People’s Party (PP) led by its presidential candidate Ahn Cheol-soo projected its spending at 40.29 trillion won to realize 100 promises.
But the numbers the three candidates admitted to exclude any money they promised to develop provinces. They all stopped short of specifying how to fund those promises. Lee and Yoon plan to find financial resources by saving government expenditures and increasing tax revenue. Only Ahn specifically said he would cover the extra cost by drawing money from 10 percent of VAT and lotteries.
Presidential candidates’ desire to spend without figuring out how to afford it may be typical, but it’s still alarming. Despite their bold plans, they mostly stay mum on how to fund them.
The government habitually resorts to adjusting priorities on spending when the need arises. But economic bureaucrats know too well how difficult it is to cut existing budgets or eliminate tax exemptions or deductions. A responsible candidate must present feasible ways to do that. Otherwise, they must express an intention to raise taxes.
If a candidate makes hefty promises without specifying how he will finance them, the market reacts very sensitively. The record rise in interest rates on three-year government bonds reflects the market’s deep concerns about the candidates’ unfettered campaign promises. Whoever becomes president will most likely spend a lot and order the issuing of more government debt. Political critic Chin Jung-kwon sarcastically compared the race for spending more money to a battle between an “alien and a predator” as in the sci-fi movie “Alien vs. Predator.” “In a nutshell, there is no future for mankind,” he said. That refers to the movie. If you replace “mankind” with “our country,” it means this election.