Su­per wel­fare bud­get

Con­cerns mount­ing over swift rise in gov’t spend­ing

The Korea Times - - OPINION -

The Cab­i­net en­dorsed the 2018 state bud­get pro­posal of 429 tril­lion won ($381 bil­lion), a 7.1 per­cent in­crease from this year, Tues­day. It is the big­gest year-on-year rise since 2009 when the Lee Myung-bak ad­min­is­tra­tion raised spend­ing by 10.4 per­cent to re­spond to the global fi­nan­cial cri­sis.

The high­light of the pro­posal is a huge in­crease in wel­fare ex­pen­di­ture, which takes up a whop­ping 34 per­cent of the to­tal at 146.2 tril­lion won. This is the first time that more than a third of the state bud­get will be al­lo­cated to the so­cial wel­fare, health and la­bor sec­tors.

There will also be a no­tice­able in­crease for ed­u­ca­tion and na­tional de­fense. On the other hand, the gov­ern­ment will sig­nif­i­cantly re­duce ex­pen­di­ture on pub­lic con­struc­tion projects. In­fra­struc­ture spend­ing will be cut by a record 20 per­cent to 17.7 tril­lion won.

Fi­nance Min­is­ter Kim Dong-yeon un­der­lined the ac­tive role of fis­cal pol­icy in es­tab­lish­ing a healthy cy­cle of jobs, dis­tri­bu­tion and growth.

The “su­per wel­fare bud­get” re­flects the ur­gency of the big­gest chal­lenges for the Moon ad­min­is­tra­tion, such as youth un­em­ploy­ment and an ag­ing so­ci­ety. But there are some faults with the pro­posal that should not be over­looked by the Na­tional Assem­bly.

First, it is based on an overly op­ti­mistic eco­nomic outlook. The record bud­get in­crease is based on the gov­ern­ment’s es­ti­mate that the econ­omy will re­cover to achieve 3 per­cent growth and that to­tal rev­enue will reach 447.1 tril­lion won in 2018, up 7.9 per­cent from this year. But the Bank of Korea es­ti­mate sug­gests that the growth forecast for this year will re­main in the 2 per­cent range. Some ex­perts say tax rev­enue may fall short of the gov­ern­ment’s ex­pec­ta­tions and that it will raise taxes not just for the su­per-rich and con­glom­er­ates but also for or­di­nary peo­ple.

Sec­ond, there is ex­ces­sive fo­cus on in­ef­fec­tive wel­fare pro­grams. For in­stance, ex­pand­ing hir­ing in the pub­lic sec­tor may prove a wrong ap­proach to eas­ing youth un­em­ploy­ment and only bur­den future ad­min­is­tra­tions and tax­pay­ers in the long run. Pro­grams like child­care al­lowances are costly, but will not have the de­sired ef­fect of rais­ing the birthrate.

Third, the pro­posed bud­get lacks a long-term in­vest­ment plan for the na­tion’s future. For ex­am­ple, there was no sig­nif­i­cant in­crease for re­search and de­vel­op­ment.

The pro­posal will be sub­mit­ted to the Na­tional Assem­bly by Fri­day. The dead­line for pass­ing the pro­posal is Dec. 2. Be­fore that, the Assem­bly should carry out a metic­u­lous re­view to max­i­mize its ef­fect on im­prov­ing the econ­omy and the peo­ple’s liveli­hoods while en­sur­ing fis­cal sound­ness.

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