Buoyed by its overwhelming win in last week’s parliamentary election, the ruling Democratic Party of Korea is pushing to provide all households with up to 1 million won ($820) in emergency relief money to help them through hardships caused by the novel coronavirus outbreak.
Last month, the government unveiled a plan to offer rescue funds to about 14 million households comprising the bottom 70 percent income bracket.
But the liberal ruling party pledged during the election campaign that it would push to expand the scope of recipients to all 20 million households.
A day after the election, party leader Lee Hae-chan vowed to carry out the pledge “as soon as possible.”
The ruling party is now asking the main opposition United Future Party to cooperate in passing an extra budget bill by the end of this month to ensure the envisioned rescue funds will be doled out to all households regardless of income level.
The conservative opposition party is in an awkward position.
Hwang Kyo-ahn, who stepped down as party leader to take responsibility for the election results, had proposed granting half a million won to each and every one of the nation’s 51.5 million people. But some party members are now voicing objections to the indiscriminate distribution of rescue funds.
The Ministry of Economy and Finance has adhered to its plan to offer the one-off relief money to households in the bottom 70 percent income range.
On Thursday, it unveiled an extra budget bill worth 7.6 trillion won to help finance the planned relief program, which is estimated to cost 9.7 trillion won. The remainder of the cost is set to be covered by local governments.
The ministry plans to finance the proposed supplementary budget by readjusting expenditure items for this year’s regular budget -- set at a record high of 512 trillion won -- without issuing additional state bonds.
While briefing reporters on the extra budget bill, Finance Minister Hong Nam-ki said the emergency rescue program had been worked out in consideration of “urgency, efficiency, fairness and fiscal affordability.”
Expanding the program to cover all households as requested by the ruling party is estimated to cost 13 trillion won. Ruling party lawmakers have demanded the government issue state bonds worth more than 3 trillion won to fund the expanded rescue package.
Officials from the government and the ruling party remained apart on the matter during their meeting Sunday.
But there is speculation that the Finance Ministry will eventually cave in to pressure from the ruling party, as the presidential office seems to be increasingly leaning toward handing out payments to all households.
But recent data strengthens the need for more caution to preserve fiscal room to cope with the full range of economic and social challenges that will face the nation after the COVID-19 crisis.
The country lost about 195,000 jobs in March, marking the first on-year loss in more than a decade, according to data released by Statistics Korea last week.
The number of employed people who took temporary leave surged by 1.23 million to 1.6 million last month, the sharpest rise since 1983, when the statistics agency began compiling related data.
A recent report from the International Monetary Fund predicted that Korea’s economy would contract 1.2 percent this year, as the coronavirus disrupts global business and ravages consumer demand. It would mark the first on-year contraction of Asia’s fourth-largest economy since 1998.
In the first 10 days of April, the country’s exports tumbled 18.6 percent from a year earlier, according to customs data.
Moreover, the ruling party’s proposal is far from adequate to meet the urgent need for financial support for people left more vulnerable to the fallout from the coronavirus outbreak, including small business owners and temporary and daily workers.
The most reasonable idea would have been to give the relief money to households whose income stands at or below the median income as initially considered by the Finance Ministry.
It is also worrisome that the country’s fiscal imbalance is worsening at a steep pace under the Moon administration. It is increasing government spending to offset the negative effects of its income-led growth policy, while tax revenues decline amid a prolonged economic slump.
National debt is estimated to rise to a record high of 815.5 trillion won this year, accounting for 41.2 percent of the country’s gross domestic product, as the government seeks to issue state bonds worth more than 60 trillion won to help finance the regular budget and an 11.7 trillion won extra budget approved by the parliament in March.
To avoid placing a heavier financial burden on future generations, the administration should refrain from reckless spending.