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Deregulation can help offset a budget cut

Published: 27 Aug. 2024, 20:16

The Yoon Suk Yeol administration on Tuesday announced a 677.4 trillion won ($508.2 billion) budget for next year, only up 3.2 percent from this year. The increase rate is less than half the average annual increase rate of 8.7 percent during the past Moon Jae-in administration. Announcing the tightened budget plan, President Yoon underscored the importance of maintaining fiscal integrity, which he called “the core of the fiscal policy of our government.”

Despite the remarkable budget cut, the conservative administration upheld the principle of protecting the vulnerable class by lifting the ceiling of the median income — a standard for offering welfare benefits — by the largest-ever margin to provide tailored financial support for the needy. Such a targeted approach is even more efficient — and effective — than the universal cash handouts of 250,000 won to 300,000 won per person, which were proposed by the opposition Democratic Party earlier.

We can understand the conservative government’s plan to offer 300,000 won per year to small merchants suffering from a drastic hike in delivery fees by major platforms. The rate of shutdowns of mom-and-pop stores surged to 9.5 percent last year. Nevertheless, such universal handouts are nothing but a quick fix.

As domestic consumption is sluggish, voices calling for more fiscal inputs are growing. Some people even criticize the conservative government for its “obsession with fiscal health.” Any government must strike a careful balance between “fiscal role” and “fiscal integrity.” But the past Moon administration didn’t, as clearly evidenced by the shocking increase of more than 400 trillion won in government liabilities during the five years of the liberal government. President Yoon said that the massive debt handed over to his administration narrowed his government’s maneuvering room. Despite his repeated blaming of the past government, his words are not entirely wrong.

Both the United States and Korea are preparing to lower the benchmark rate. But monetary policy alone cannot compensate for a lack of budgets. Our government must take a cautious approach toward lowering the base rate amid signs of a heated housing market. When policy tools are limited, deregulation can take their place to stimulate investment and create jobs. Deregulation often fizzled out in the latter part of past administrations despite their crusade to ease regulations in the early stage. The Yoon administration must embark on a strong battle against stifling regulations.

Lawmakers will soon start deliberating over next year’s budget. Their secret deals behind closed doors over the budget should not be repeated this year. As the two major parties finally pledged to improve ordinary citizens’ livelihoods, we hope they start to have rational debates to find a better way for the country instead of fiercely fighting over ideological differences as in the past.