President Yoon should drop some to help restore financial health
Laws enacted last year alone are likely to increase the government's spending by about 38 trillion won ($29.7 billion) while reducing its revenue by nearly as much for five years. More specifically, the implementation of 153 laws involving financial expenditures that were ratified by parliament in 2021 will result in 38.32 trillion won in additional budget spending between 2022 and 2026, according to a report by the National Assembly Budget Office. In contrast, the amendment to the Tax Reduction and Exemption Control Act and other similar laws will erode tax revenues by 34.72 trillion won.
Many more things and places require the government's money, but tax revenues will sharply drop, raising concerns over a rapid deterioration of the nation's finances. To make matters worse, the national debt has snowballed because of various policies of the former Moon Jae-in administration. As a result, the national debt ― fixed national debt and pension liabilities ― swelled by 763 trillion won under the previous administration to push the total to 2,196 trillion won last year.
The new administration, which takes over the state coffer, should move toward restoring financial health. However, President Yoon Suk-yeol has yet to show such willingness. The 110 national agenda items unveiled recently by his transition team included most of the costly pledges he made during the presidential campaign. The transition committee estimated that it would cost 209 trillion won to turn these promises into action over the next five years. However, the only ways presented by the new administration to finance them were through restructuring expenses and surplus revenues.
Suppose Yoon sticks to most of his costly campaign pledges. In that case, he also will be criticized for increasing the national debt and imposing an excessive burden on future generations, similar to his immediate predecessor. Huge budget spending is like adding fuel to the inflation crisis. Therefore, the Yoon administration should reexamine its political agenda, abolish or downsize some big-ticket pledges, and speed up the legislation of fiscal rules.
Laws enacted last year alone are likely to increase the government's spending by about 38 trillion won ($29.7 billion) while reducing its revenue by nearly as much for five years. More specifically, the implementation of 153 laws involving financial expenditures that were ratified by parliament in 2021 will result in 38.32 trillion won in additional budget spending between 2022 and 2026, according to a report by the National Assembly Budget Office. In contrast, the amendment to the Tax Reduction and Exemption Control Act and other similar laws will erode tax revenues by 34.72 trillion won.
Many more things and places require the government's money, but tax revenues will sharply drop, raising concerns over a rapid deterioration of the nation's finances. To make matters worse, the national debt has snowballed because of various policies of the former Moon Jae-in administration. As a result, the national debt ― fixed national debt and pension liabilities ― swelled by 763 trillion won under the previous administration to push the total to 2,196 trillion won last year.
The new administration, which takes over the state coffer, should move toward restoring financial health. However, President Yoon Suk-yeol has yet to show such willingness. The 110 national agenda items unveiled recently by his transition team included most of the costly pledges he made during the presidential campaign. The transition committee estimated that it would cost 209 trillion won to turn these promises into action over the next five years. However, the only ways presented by the new administration to finance them were through restructuring expenses and surplus revenues.
Suppose Yoon sticks to most of his costly campaign pledges. In that case, he also will be criticized for increasing the national debt and imposing an excessive burden on future generations, similar to his immediate predecessor. Huge budget spending is like adding fuel to the inflation crisis. Therefore, the Yoon administration should reexamine its political agenda, abolish or downsize some big-ticket pledges, and speed up the legislation of fiscal rules.
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