(EDITORIAL from the Korea Herald on Feb. 27) - No undue delay

A supplementary budget is a revision to the main budget. It is required by additional spending needs that are unforeseen at the time of the annual budget request or changes in spending priorities. It usually covers the costs of recovery projects launched in the wake of natural disasters, such as floods, or a shortfall in tax revenues.

It is barely two months ago that the National Assembly approved the 2009 budget
request. There has since been no natural disaster. Moreover, it may be seen to be
too early to talk about a shortfall in tax revenues.
Nonetheless, the administration is working on a supplementary budget. The reason
is simple: There is no other way to fight the economic downturn at a time when
the central bank's key interest rate is at a historical low of 2 percent.
The bank cannot make any more rate cuts without exposing itself to a greater risk
of a liquidity trap. The bank nearly exhausted its capacity for stimulating the
hard-pressed economy when it cut the rate to the lowest-ever level earlier this
month. As such, it is only natural for the administration to attempt to spend its
way out of the economic crisis, which is deepening and widening at an
unanticipated pace.
The supplementary budget on the drawing board is setting itself apart from the
previous ones in another respect. Several billion won is normally enough to
finance disaster recovery projects. But the amount of money being considered this
time may range from 20 trillion won to 30 trillion won ($13 billion to $26
billion).
In a radio interview on Wednesday, the chief policymaker of the ruling Grand
National Party said the administration was open to the possibility of the amount
exceeding 30 trillion won. "It is not the size of a supplementary budget but
where to spend the money that should be important," the chief policymaker said.
Contrary to his claim, how much to spend is no less important than where to spend
it. But the administration will have to focus on the issue of immediate concern -
how to turn the nation around from the threat of an economic collapse. Others can
wait, including the ballooning national debt.
A sizable portion of the supplementary budget will have to be used to make up for
a shortfall in tax revenues, which, according to conservative estimates, will
amount to 9-12 trillion won. Tax revenues are closely related to growth rates.
The main budget that passed the National Assembly in December foresaw 4 percent
growth for this year. But Yoon Jeung-hyun, who assumed the post of finance
minister earlier this month, revised the growth forecast to minus 2 percent.
Still, some economic think tanks maintain that the finance minister is
unwarrantedly upbeat.
A shortfall in tax revenues should amount to 9 trillion won to 12 trillion won,
given that a decline in the growth estimate by one percentage point usually
translates into a tax shortfall of 1.5 trillion won to 2 trillion won.
In addition to making up for that loss, the administration will have to spend
more to create jobs and assist those who are being forced out of jobs. Moreover,
it will do well to provide the destitute with cash assistance or purchase
coupons. It will also have to bail out corporations having trouble getting loans,
as lending is drying up in both domestic and overseas financial markets.
Deliberation will have to start as soon as the administration submits a
supplementary budget bill to the National Assembly next month as scheduled.
Lawmakers may choose to make changes if deemed necessary. But they will have to
take extra care not to delay the passage of the urgent bill.
(END)