Rival presidential candidates in spending binge competition over pandemic relief funds
Lee Jae-myung, left, and Yoon Seok-youl / Yonhap
The presidential candidates of South Korea's two main political parties have promised extravagant national budget spending on COVID-19 relief funds despite opposition from financial authorities over fiscal soundness, with both denouncing each other's pledge as vote-buying.
Lee Jae-myung, the presidential candidate of the ruling Democratic Party (DP), has floated an idea of giving additional handouts of 300,000-500,000 won ($250-$425) to all people, while Yoon Seok-youl, the presidential nominee of the main opposition People Power Party (PPP), came up with a proposal of spending 50 trillion won to compensate the self-employed and small business owners hit by the pandemic.
Lee, a former Gyeonggi Gov. has been claiming the relief amount so far doled out by the government is too small considering the nation's GDP and in comparison with other countries. He said his universal relief grant scheme can be financed, as the government is expected to log excess tax revenue of some 40 trillion won for this year.
"We have financial resources, because there is a tax revenue surplus," Lee said in a recent phone interview with Yonhap News Agency. "That surplus came from people's pain, so we should use it to alleviate their suffering."
A maximum of 25 trillion won would be necessary to give grants to the 52 million population under Lee's plan.
In support of Lee's pledge, the DP on Tuesday said it will try to provide relief handouts to all people in January after earmarking the money in next year's budget, though its proposed amount is smaller than Lee's after learning the disposable tax revenue surplus is smaller than it thought.
Financial Minister Hong Nam-ki said earlier this week the government has already drawn up budgets in a way that tapped 31.5 trillion won of tax revenue surplus for its fiscal spending, meaning only some 10 trillion won of tax revenue surplus is available for use.
"If tax revenue surplus is about 10-15 trillion won, then relief grants of 200,000-250,000 won can be given to all people," said Rep. Park Wan-joo, who heads the DP's policy coordination committee.
Although Lee wanted the government to dole out additional cash handouts this year, the DP said it will try to give them next year, as it is realistically impossible to draw up an extraordinary budget while the National Assembly is reviewing the government's 2022 budget proposal.
The DP wants this year's excess tax revenue to be recognized as tax collected in 2022 so that it can finance the COVID-19 relief grant scheme, which the opposition PPP calls an "accounting fraud."
"Under fiscal law, when there is tax revenue surplus, it should be used first to pay national debts or to give local financial subsidies, but since it is difficult to fund its relief grants scheme, they are playing 'tricks,'" PPP's Yoon wrote on his Facebook page on Tuesday.
"Robbing people's right pocket to fill their left pocket and taking political benefit as a commission in that process are nothing but bad populism," he added.
Yoon has proposed an even bigger spending scheme.
However, he has insisted on giving relief grants to the self-employed and small business owners hit hard by the pandemic, rather than doling out money to all people.
"Spending money in dribs and drabs, like Lee's universal relief grants will not work," Yoon said in a recent media interview. "The government should fully compensate damages that businesses suffered from business hour and gathering restrictions."
Of his proposed spending of 50 trillion won, Yoon said 43 trillion won will be used to directly fund small businesses after assessing and classifying their damages in grades. He added 5 trillion won will be injected to credit guarantee foundations to support their loans, while 2 trillion won will be used to support tax deductions.
Yoon's side plans to fund the money by drawing up a supplementary budget next year if the former prosecutor general wins the upcoming presidential election. His camp wants to execute the pledge within 100 days of Yoon's inauguration.
"It's difficult to reflect them in this year's budget," said Rep. Kim Gi-hyeon, floor leader of the PPP, in an MBC radio interview. "If we win the election, we need to reorganize the Moon Jae-in administration's budget, and through that process, I think we can find ways of financing and measures to execute the plan."
The DP lashed out at Yoon over his relief scheme, saying it is self-contradictory.
"If that's the case, we should spend it right now," said Rep. Song Young-gil, chairman of the DP. "While opposing Lee's proposal of spending 12-13 trillion won, he is trying to spend 50 trillion won."
While the DP and the PPP are locking their horns over COVID-19 relief handouts, the government has showed its opposition to both of their schemes over growing national debt.
"Not only universal relief grants, but the recently reported 50-trillion won damage compensation should be reviewed in light of our fiscal soundness," said Finance Minister Hong at a parliamentary session. "I'm worried that people will have some expectations over such plans."
Hong also stressed the government drew up the budget by selling debts, refuting claims that there is enough money in the state coffer.
Experts also criticize relief grant schemes from both Lee and Yoon, saying they should think about sustainability.
"It's really lamentable that the government providing cash handouts with public funds has become routine," said Kim Woo-cheol, a professor who teaches taxation at the University of Seoul. "We should minimize cash handouts by providing them to only vulnerable people and use the money to expand social service infrastructure for others." (Yonhap)