Another supplementary budget is not affordable

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Another supplementary budget is not affordable

 President Moon Jae-in and President-elect Yoon Suk-yeol finally held a meeting after the March 9 presidential election following a last-minute cancellation amid a war of nerves between the outgoing and incoming presidents. The two mostly avoided sensitive issues and kept dialogue to common and formal themes so as not to damage the reconciliatory mood in the most delayed meeting between the sitting president and a successor in waiting.

Yoon prioritized the agenda of a budgetary increase to finance compensation for business owners for the losses from the government’s tough social distancing measures. During his campaign, Yoon promised to double compensation to merchants from a maximum 3 million won ($2,449) per head on top of the same amount handed out through a supplementary budget in February.

The ruling Democratic Party (DP) which holds a super majority in the National Assembly positively responded to Yoon’s’ proposal of creating a second budgetary increase in the scope of maximum 50 trillion won. Business loss from state-enforced virus mitigation rules should be compensated. But financing another extra budget tripled from 16.9-trillion-won in February won’t be easy. The Ministry of Strategy and Finance has been studying areas of streamlining but cannot find room for extra financing.

It is not easy to change the spending plans laid out in the budgetary outline for 2022 without strong grounds.

Yoon has proposed to rationalize the so-called New Deal projects worth 34 trillion won. But the budget includes support for youth and childcare subsidies which cannot be easily cut back. Reserves from last year’s extra tax collection also stop at a mere 3 trillion won.

That leaves the option of issuing more national bonds to finance the second supplementary budget. While agreeing to a fast extra budget, the DP is transferring the burden of coming up with the means to the incoming government. Deficit has already stretched to 71 trillion won this year with the addition of the first supplementary budget. When another 50-trillion-won debt is added, national liabilities could top 1,100 trillion won this year.

Whether the budgetary increase is proposed under the outgoing or incoming government is of little importance. Whoever does it, the budgeting must take into account our economic conditions. Inflation is likely to gallop due to price and supply instability in raw materials, oil, commodities and grains. Spending discretion is necessary on increased downside risks in the economy. Pushing with campaign promises despite a lack of funds is irresponsible. A head of state must reexamine platforms with cool-headed analysis or seek understanding from the people on necessary spending.
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