Election pledges are just conditional promises ― nothing more, nothing less. For the promises, no presidential candidate gains a mandate or assumes an obligation until after he or she wins the election. This holds true even if the candidate is the standard-bearer of the ruling party.
But Rep. Park Geun-hye, the presidential nominee of the ruling Saenuri Party, is putting pressure on President Lee Myung-bak and his administration to endorse her election promises.
Her undue request comes at a time when the administration is working on its 2013 budget request. It would undoubtedly enhance her chances of winning the election in December if the budget bill, set to be submitted to the National Assembly by Oct. 2, contained funds to finance her campaign promises.
One case in point is her request to finance her promise to cut university tuition by half. When Park met Lee last Sunday at her request, she called on him to support her promise. Lee must have found it difficult to turn down her request, though he was reportedly noncommittal.
Her promise to halve university tuition is nothing short of populist. Finding it crucial to win the hearts and minds of young voters, she committed herself to halving the tuition when she had a debate with representatives of the national association of university student unions last month. She did not seem too concerned about funding the pledge.
The administration would have to sacrifice some of the projects that it regards as vital if it were to pay for half the tuition out of the state coffers. For this reason, the administration has been resisting pressure from the Saenuri Party and the main opposition Democratic United Party, both of which promised to cut university tuition by 50 percent during their campaigns for the April 11 general elections.
Another untenable request is Park’s call on the administration to spend taxpayers’ money to help support the house poor, those who have little cash because almost all of their net worth is tied up in their houses at a time when the property market is in a slump. The ruling party says it will soon announce a policy package in this regard.
A steep decline in house prices is hurting the Korean economy badly, though it may not be as serious as in the United States during its subprime mortgage crisis. According to a report from the KB Research Institute, 185,000 households own homes whose mortgages, key money deposits (for which alone homes are rented) or both (in the case of mortgaged homes that are rented for key money deposits) exceed 80 percent of sales prices.
The drop in property value is all the more painful to homeowners, with household debt having almost doubled during the past 10 years. It is also posing a serious threat to the nation’s financial stability, with the mortgage delinquency rate remaining at the highest level in recent years. Some argue it is a ticking time bomb for the Korean economy.
At the same time, it is a cause of misery to so many homeowners, who, having made purchases in a property market boom, are now being forced to sell them at huge losses. News reports abound about the plight of households in the middle income bracket sliding into house-poor status. Even so, Park’s call for government support is no less defensible than a demand for the halving of university tuition.
One proposal being seriously considered by the ruling party is to buy homes with taxpayers’ money and lease them back to the previous homeowners with a buyback option. Of course, the purchase prices would have to be set at a level higher than market prices if they were to be attractive to the house poor.
The rationale behind the proposal is not beyond comprehension. Purchases made in this manner would help prop up falling house sales prices and revive the moribund property market, not to mention Park’s higher chance of election.
But such support would raise fundamental questions about the market economy: Why should the government be held accountable for investments individuals have made at their own risk? If an investment produces a profit, should it also be shared by the government?
Simply put, support for the house poor would risk undermining the nation’s capitalist economy. Let the market sort things out.
