(EDITORIAL from the Korea Times on Oct. 8) - Snowballing debt: Seoul should focus on fiscal balance before too late

Finance Minister Yoon Jeung-hyun boasted Monday that Korea is the target of
international attention for being the world's sixth-fastest to escape from
recession.
This should come as a small surprise: Korea's fiscal spending for economic
recovery, as measured by its percentage of gross domestic product, was the second
largest among major economies after only Russia. Taking the huge tax cuts
enforced by the Lee administration into account, Seoul will easily top the list
of governmental profligacy. U.S. President Obama, who had to treat the very
source of the global financial fiasco, would be green with envy over the
unrestrained stimulus outlay.
Minister Yoon says the nation can afford it, as government debt accounts for just
35 percent of GDP (about half the average level of other OECD members). But no
one else other than a governing party lawmaker has refuted the allegation at the
ongoing parliamentary audit.
Rep. Lee Han-koo of the Grand National Party says the ``actual" or
broadest-defined government debt ??? including payment guarantees, liabilities of
state enterprises and reserve requirement for national pensions ??? could reach
1,439 trillion won ($1.2 trillion), four times as large as the government's
narrowest-defined amount. Lee's computation is of course somewhat exaggerated,
but even by the OECD formula that includes quasi-governmental agencies' funds and
other special accounts, Seoul's debts should be at least double that of the
official figure.
It defies our understanding why the government, which puts global standards ahead
of all else, is dragging its feet when it comes to making its debt calculation
conform to an internationally-recognized standard. Korea has even been long amiss
in the IMF's tally of gross government debts.
Opposition politicians find part of the reasons for such delay in what they call
the ``governmental window-dressing,'' in which the Lee administration passes part
of the central government's debts or expenditures to state enterprises. For
instance, it forced Korea Water Resources Corp. to shoulder 8 trillion won to
help finance the controversial river-refurbishing project, and state-run railroad
company KORAIL to take over the money-losing Airport Railroad.
No less serious than the amount of debts is how the budget is spent. It took
Japan, by far the world's heaviest government debtor, nearly two decades to
realize the construction-oriented economic recovery policy does not work at all,
leaving only huge debts. The environment-destroying river project is the very
example of the Lee administration following the path of the neighboring country.
Add to this the equally controversial tax cuts for the rich, which also has
proved to produce little effect on long-term growth, and was all but abandoned
even in its birthplaces of the U.K. and U.S., then the Koreans have a government
``benchmarking'' the wrong examples in both revenue and spending sides of fiscal
policy.
Above all, Korea needs to always consider its peculiar fiscal demand for eventual
reunification as well as the world's most rapidly aging society, which may prove
to be not such long-term issues.
The global financial turmoil was sparked by bank executives anxious to get early
results for short-term gains, for personal and corporate reasons. Taxpayers had
to pay the price for these private firms' greed and haste. The burden of similar
mistakes by the government will be borne by our unfortunate descendants.
(END)