By Yoon Ja-young
While the government is expected to come up with a "super budget" with the ruling party demanding a double-digit increase, an opposition lawmaker who served as vice finance minister warned about the consequences that an expansionary fiscal policy can bring about.
"To increase fiscal spending, there should be either an increase in tax revenue or the government should issue bonds. Tax will weigh on the current generation while government debt will pressure future generations. Some say it is okay since Korea's government debt ratio is relatively low, but it can uncontrollably snowball in a moment, as seen in Japan," Rep. Song Eon-seog of the main opposition Liberty Korea Party said in a policy meeting with reporters held in Sejong, Thursday evening.
The first-term lawmaker served as vice finance minister between 2015 and 2017. He won in the June 13 by-election in Gimcheon, North Gyeongsang Province.
He pointed out that many European countries saw their government debt ratio rise steeply only a few years after the global financial crisis. They have been controlling the figure since then, unlike Korea. He also showed concern that over half of the debt is non-financial debt without payment resources, which should be paid off with taxpayers' money.
While agreeing that increasing government spending in the industrial sector could help sustain the economy, he said there should be a more cautious approach in increasing welfare spending since the introduction of any welfare program has long-term effects.
"Welfare programs such as child allowances and a basic pension for senior citizens require a huge amount of fiscal spending. Policymakers should keep in mind that the aging population coupled with the falling birthrate will come simultaneously with increased spending for unification."
He also doubted whether the administration's income-led economic growth policy is working.
"The steep minimum wage hike was supposed to pull up the income of the low-income class, boosting their consumption and pulling up economic growth. However, employers ended up firing workers as their profit remained the same. Korea's gap with the global economic growth expansion, and its job market is in the worst condition," he said, adding that he hasn't heard of any successful case of income-led growth strategies in other major countries.
"When one finds that something is wrong, he should have the courage to stop there to examine and correct it," he said. "The administration, however, says it will further strengthen the policy to get the outcome it wants. That doesn't seem right."
While the current administration steeply cut SOC spending, he said maintaining a certain level is necessary for the working class.
"During the election campaign, I met many merchants at markets and daily construction workers in Gimcheon. They come out to get a daily job every morning, but they more often failed," he said.
"SOC is one of key routes where fiscal spending can work. There is a need to be more positive about it."
Regarding the real estate tax hike on those who own expensive or multiple homes, he said the government should leave at least one door open so that they can exit and sell their assets. "By simultaneously raising the property holding tax as well as capital gains tax and strengthening tax on financial income, the homeowners are driven into a trap. It should be more cautious about taxation," he said.
While the government is expected to come up with a "super budget" with the ruling party demanding a double-digit increase, an opposition lawmaker who served as vice finance minister warned about the consequences that an expansionary fiscal policy can bring about.
"To increase fiscal spending, there should be either an increase in tax revenue or the government should issue bonds. Tax will weigh on the current generation while government debt will pressure future generations. Some say it is okay since Korea's government debt ratio is relatively low, but it can uncontrollably snowball in a moment, as seen in Japan," Rep. Song Eon-seog of the main opposition Liberty Korea Party said in a policy meeting with reporters held in Sejong, Thursday evening.
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| Rep. Song Eon-seog |
He pointed out that many European countries saw their government debt ratio rise steeply only a few years after the global financial crisis. They have been controlling the figure since then, unlike Korea. He also showed concern that over half of the debt is non-financial debt without payment resources, which should be paid off with taxpayers' money.
While agreeing that increasing government spending in the industrial sector could help sustain the economy, he said there should be a more cautious approach in increasing welfare spending since the introduction of any welfare program has long-term effects.
"Welfare programs such as child allowances and a basic pension for senior citizens require a huge amount of fiscal spending. Policymakers should keep in mind that the aging population coupled with the falling birthrate will come simultaneously with increased spending for unification."
He also doubted whether the administration's income-led economic growth policy is working.
"The steep minimum wage hike was supposed to pull up the income of the low-income class, boosting their consumption and pulling up economic growth. However, employers ended up firing workers as their profit remained the same. Korea's gap with the global economic growth expansion, and its job market is in the worst condition," he said, adding that he hasn't heard of any successful case of income-led growth strategies in other major countries.
"When one finds that something is wrong, he should have the courage to stop there to examine and correct it," he said. "The administration, however, says it will further strengthen the policy to get the outcome it wants. That doesn't seem right."
While the current administration steeply cut SOC spending, he said maintaining a certain level is necessary for the working class.
"During the election campaign, I met many merchants at markets and daily construction workers in Gimcheon. They come out to get a daily job every morning, but they more often failed," he said.
"SOC is one of key routes where fiscal spending can work. There is a need to be more positive about it."
Regarding the real estate tax hike on those who own expensive or multiple homes, he said the government should leave at least one door open so that they can exit and sell their assets. "By simultaneously raising the property holding tax as well as capital gains tax and strengthening tax on financial income, the homeowners are driven into a trap. It should be more cautious about taxation," he said.
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