Budget Expansion

Taxpayer Burden to Grow Due to Lavish Welfare Spending

The government has decided to increase its budget spending by more than 7 percent next year, raising concerns about fiscal health and a higher taxpayer burden. According to a 2008 budget plan released by the Ministry of Planning and Budget on Thursday, fiscal spending will reach 257.3 trillion won ($267.7 billion), up 7.9 percent from this year's 238.4 trillion won. The budget growth rate is the highest since 2002 when it stood at 10.5 percent. The rate was estimated at 6.8 percent in 2005, 6.9 percent in 2006 and 6.4 percent in 2007.

Ministry officials claimed that the budget is not expansionary but largely neutral for economic growth. However, there is no doubt that the plan is based on an expansionary fiscal policy in which President Roh Moo-hyun has put more weight on welfare programs amid a rapid increase in the number of elderly citizens and the widening gap between the rich and the poor. The Roh administration has been criticized for recklessly funneling state funds to various social welfare projects. Since he took office in February 2003, the President has resorted to populism, increasing spending for the poor and underprivileged.

Conservative scholars and opposition lawmakers have slammed Roh for being too generous in welfare spending. They blamed him for triggering an astronomical budget deficit at the expense of fiscal soundness. The expansionary budget is also a result of Roh's policy of maintaining big government. His administration has so far increased the number of civil servants by about 50,000. People have to pay more taxes to cover the increased payroll for more government jobs. Despite public outcry over this lavish expenditure, the administration plans to recruit 50,000 more public servants over the next five years.

Next year the government budget account, excluding the social security balance, will suffer from a deficit of 11 trillion won, down from this year's 14.8 trillion won. Budget officials said the shortfall will be equivalent to 1.1 percent of gross domestic product (GDP), down from 1.6 percent in 2007. It is fortunate that the deficit will fall, but policymakers must keep in mind that the balance of the budget will continue to be in the red for six years in a row.

Particularly, the national debt is predicted to jump 318.3 trillion won, up 5.8 percent from 300.7 trillion won this year. The debt burden will be transferred to the next government as Roh's term is scheduled to expire next February. In the end it is the taxpayers who have to shoulder the burden. The Roh government faces criticism that it has decided to expand budget spending in an apparent bid to woo voters ahead of the Dec. 19 presidential election.

The government plans to allocate 67.5 trillion won or 26.2 percent of the total budget to social welfare and healthcare programs. The sum is up 10 percent from this year. And the budget for education will climb 13.6 percent to 35.7 trillion won. That for research and development (R&D) is to rise 11.2 percent to 10.9 trillion won. Officials stress that the budget is designed to boost the nation's future growth potential by improving welfare and developing human resources.

However, critics claim that the budget plan is not enough to help the economy enjoy substantial growth. They point out that spending on expanding public infrastructure will edge up 2.4 percent to 18.9 trillion won. Only 12.6 trillion won has been set aside for state support of industrial development and the promotion of small and medium businesses.

The budget will soon be presented to the National Assembly. We have to closely watch parliamentary deliberation on the bill. We urge policymakers to refrain from expansionary budget planning, to ease the financial burden on taxpayers. It's time for the nation to put more stress on a balanced budget by improving the efficiency of its operation and preventing a waste of taxpayers' money.