The Korea Herald


[Editorial] Budget, debt and populism

Lawmakers have to seek more compromises to pass a host of controversial bills by year-end

By Korea Herald

Published : Dec. 27, 2022 - 05:31

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The National Assembly finally passed the Yoon Suk-yeol administration’s budget for 2023, set at 638.7 trillion won ($499.7 billion), on Saturday -- 22 days after its legal deadline of Dec. 2 amid lingering concerns about state debt and populist moves by lawmakers.

After fierce wrangling over budget details, lawmakers from the ruling and main opposition parties worked out a compromise that slashed around 310 billion won of the original government budget proposal of 639 trillion won.

Not only the budget for new state agencies such as the police bureau at the Ministry of Interior and Safety but also the budget for the issuance of local currency were cut by half in a way that broke the deadlock. The former was proposed by the Yoon administration and the latter was initiated by Lee Jae-myung, chairman of the Democratic Party of Korea.

The National Assembly also passed 19 bills along with the budget, including much-disputed amendments to the laws that govern corporate taxes, the income taxes and the comprehensive real estate tax.

As for a cut in corporate tax, lawmakers were divided along party lines. The lawmakers of the ruling People Power Party argued that a deeper cut in corporate tax is needed to revitalize the sluggish economy, while opposition lawmakers countered the decrease in corporate tax would benefit only the rich.

It is a positive development that both parties made some compromise to reach a deal on the 1 percentage point in each of the four tax brackets.

The plenary session also passed an amendment that would delay the schedule for imposing taxes on income of more than 50 million won from financial products by two years to January 2025. The pushback of the schedule is largely designed to shore up sagging corporate investment and the trouble-laden stock market.

Even though the budget was belatedly passed, there are concerns about what should be done to tackle a host of issues related to government spending as well as snowballing debt.

The outstanding debt of the country is projected to reach 1,113.4 trillion won in 2023, which accounts for 50.4 percent of the gross domestic product. As a result of reckless welfare policies led by the previous administration under President Moon Jae-in, the government debt in terms of the narrow D1 (debt securities and loans) jumped from 660.2 trillion won in 2017 to 1,069.8 trillion won in late 2022 -- a whopping 400 trillion won in increase over the past five years.

Lee Jae-myung’s local currency project, which secured a 352.5 billion won budget for next year, is feared to become another wasteful project with little economic impact.

Worse, the bulk of the 1.5 trillion won earmarked for the budget to promote regional economies is expected to be largely what lawmakers have wanted to secure for their own interest and to solidify their voter bases.

The Korean economy is beset by inflation, high interest rates and unstable fluctuation of the currency rate. Nonetheless, lawmakers still want the government to spend more than what is reasonable -- populist moves that would eventually hurt the economy and people in the form of increased government debt.

Another problem in the passage of the budget was that lawmakers did not pay attention to the rule set by the Constitution. According to Article 54 of the Constitution, the National Assembly should pass the budget 30 days before the start of a new fiscal year -- Dec. 2 this year.

In recent years, the National Assembly limited the delay to about eight days in consideration of the new rule that was introduced in 2014 to require timely passage of key bills. But rival parties wasted time for over three weeks this time, resulting in a record delay in the passage of the budget.

Even though the budget for 2023 was passed, the National Assembly has yet to deal with a slew of controversial bills that must be passed by the end of the year. Lawmakers should make efforts to make more compromises and handle urgent revision bills.