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(EDITORIAL from Korea Herald on July 2)

Economy 07:01 July 02, 2020

Reckless deliberation
Coronavirus impact cannot justify rash passage of overblown supplementary budget

The ruling Democratic Party of Korea is pushing to pass a supplementary budget bill worth 35.3 trillion won ($29.4 billion) during the ongoing session of the National Assembly, which ends Friday.

Parliamentary standing committees completed deliberation on the additional spending plan, the third of its kind this year, Tuesday, just a day after they were formed unilaterally by the ruling party with a dominant majority in the 300-member legislature.

President Moon Jae-in and Finance Ministry officials have called on the parliament to swiftly approve the latest extra budget bill drawn up to help cushion the economic impact of the coronavirus pandemic.

Over the past month, the Assembly remained in limbo due to strife between the main parties over the formation of 18 parliamentary standing committees, shelving deliberation on the spending bill submitted by the government in early June.

At a Cabinet meeting last week, Moon expressed worry that the delay in passing the supplementary budget bill would increase the suffering of the public and derail efforts to revive the coronavirus-hit economy.

Rep. Kim Tae-nyeon, the ruling party's floor leader, said Monday that deliberation on the budget bill should speed up to ensure it would be approved within the current parliamentary session.

No ruling party lawmaker appears to be paying heed to criticism from opposition legislators and a parliamentary research arm that the pending budget bill is based on misguided assumptions and is overblown even given the need to increase fiscal spending to cope with the COVID-19 crisis.

During the brief two-day deliberation boycotted by the main opposition United Future Party, parliamentary standing committees, all of which are chaired by ruling party legislators, added a combined 3.1 trillion to the government-proposed extra budget, which in itself was the largest on record.

The bloated spending plan is certain to be passed intact by the Special Committee on Budget and Accounts before being put to a vote in the plenary session of the parliament Friday.

The opposition party has criticized the extra budget for squandering taxpayers' money by focusing on creating short-term temporary jobs, which would do little to help ease worsening unemployment.

In a report released last week, the National Assembly Budget Office raised the need to "sharply change and complement" the extra budget bill submitted by the administration.

It noted that parliamentary budget deliberation should take declining tax revenues into serious account. The government's plan for funding the supplementary budget is based on a projection that the deficit in national tax revenues would reach 11.4 trillion won this year. But the report estimated the deficit at 14.4 trillion won.

The parliamentary research arm indicated it was unreasonable for the extra budget to set aside money to create more than 1.55 million jobs, given that unemployment stood at 1.27 million as of May.

With regard to plans for financing projects to be implemented under the initiative Moon has described as the Korean version of the New Deal, it said most of them lacked specific purposes and could hardly be expected to bring concrete results.

The report also noted that more caution should be taken against issuing a large amount of state bonds to help cover expanded fiscal spending, as the country's economy is being drawn into a low-growth rut with its population aging at the fastest pace in the world and birthrate plummeting to the world's lowest level. The Finance Ministry plans to issue government debt worth more than 100 trillion won this year -- 23.8 trillion won to help fund the third supplementary budget alone.

The main opposition party is now asking the ruling party to delay the passage of the extra budget bill until the end of next week.

But ruling party leaders are adamant about passing it no later than Friday, saying it is important to implement it in an urgent manner. Finance Minister Hong Nam-ki told lawmakers Tuesday that the effectiveness of the extra budget depends on its timing.

But the sense of urgency expressed by the government and the ruling party is far from persuasive, given less than half of the first and second supplementary budgets passed earlier this year has been spent so far.

It is just senseless and irresponsible for the parliament to pass a supersized supplementary budget bill after a few days of deliberation. Such a reckless way of handling state finance might do more fundamental and severe damage to the economy than the impact of the pandemic outbreak.

(END)

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