(EDITORIAL from the Korea Times on March 6)

Fiscal thriftiness needed: 'Super Budget' should not turn into 'super debt'

The size of the supplementary budget to stimulate the moribund economy has ??? in
no time at all ??? increased by leaps and bounds.

Only half a month ago, the government's budgeters talked about extra spending of
10 trillion won ($6.5 billion), but the amount has since snowballed to 20
trillion won and further to 30 trillion won before anyone realized it. Some
officials of the governing Grand National Party (GNP) are even citing a private
report, which calls for an extra budget of a hefty 50.7 trillion won to attain
2.9-percent economic growth.
Hardly heard are discussions on how to use this additional budget ??? how much
money to allocate to which sector ??? to maximize its effect. This fiscal
equivalent of putting the cart before the horse is a disturbing reminder of how
lightly these elected and appointed officials regard taxpayers' money.
Some GNP lawmakers say Korea's government debt is still at a relatively low
level, accounting for 33 percent of its gross domestic product (GDP), noting an
additional 3 percentage points or so will not matter that much. These are not the
remarks to be made by an official living on and managing state finance with
taxpayers' money. When debts by state enterprises and other public sectors are
included, the comparable ratio jumps to about 70 percent, the average level of
the 30-member Organization for Economic Cooperation and Development (OECD).
More fundamentally problematic is the governing camp's habit of using the extra
budget as some sort of supplementary means of economic stimulus. Rep. Lee
Hahn-koo, a former chief policymaker of the GNP, hit the nail on the head,
saying, ``The extra budget is like kindling, but the government is trying to use
it as firewood.''
But even the 30 trillion-won supplementary budget would have been more
affordable, had the government not introduced tax cuts for wealthy property
holders, which eroded revenue by 13.5 trillion won last year, and is expected to
curtail it by an additional l20 trillion won this year. The revenue loss will
have to be filled by all taxpayers, including wage earners who don't even have
their own homes.
No less serious is where to spend the money. At least 16 trillion won of the
budget will be invested to refurbish four major rivers and build a canal between
Seoul and Incheon over the next few years. Pohang in North Gyeongsang Province
??? the home of President Lee Myung-bak and his elder brother, Rep. Lee
Sang-deuk, saw an increase of 100 billion won in its social infrastructure
budget, the biggest for all precincts ??? in a typical example of earmarked
outlays for powerful politicians.
Pouring a massive amount of money into large public works can jumpstart the
economy, but its effects are short-lived, leaving only lasting debts ??? and lots
of while elephants ??? as has showcased by Japan's lost decade.
Instead, the government should spend the money on improving economic fundamentals
by creating new growth engines and rectifying income polarization. It ought to
further enhance mainstay industries and promote new, future-oriented ones while
weaving its social safety net with finer mesh.
In a worst-case scenario, the government could end up giving only narcotics to a
patient with a serious illness, while avoiding the painful but vital operation of
economic reforms. Such concerns are growing further, as the ongoing recession
will likely prove to be far deeper and longer than many had expected.
(END)