The ruling Saenuri Party and the main opposition Democratic United Party have been competing to commit themselves to expanding welfare programs and introducing new ones. Of course, their spending commitments aim to help their campaigns in the December presidential election.
A ballpark estimate by the administration puts the additional spending needed to finance the welfare programs for the next five years at 340 trillion won. The administration says yearly additional spending would range from 43 trillion won to 67 trillion won each year.
But the tax revenues are projected to increase by a mere 1.66 trillion won during the next five years if the administration’s proposed revision to the tax code is approved by the National Assembly. The revision bill, which was unveiled on Wednesday, contains no drastic changes to the tax code.
The yawing gap looks unbridgeable, although the administration does not rule out the possibility of increasing the tax revenues in consultation with the political parties. Minister of Strategy and Finance Bahk Jae-wan was quoted as saying tax revenues would be raised by a big margin if it was deemed necessary.
The administration’s allusion to Plan B was perplexing, to say the least. On one hand, President Lee Myung-bak’s administration may have felt it burdensome to propose large-scale surgery to the taxation framework at a time it was entering the homestretch. On the other, it is suspected of putting up resistance to political parties bent on a spending spree.
Either way, it was not doing its job properly. It should have set the agenda for deliberation at the National Assembly by saying, in unmistakable terms, what level of spending would be most appropriate, given the growth projections it had come up with. What it did was pass the buck.
For the rival parties to deliberate and make a compromise on the administration’s budget proposal is a time-consuming process. Its passage is often delayed until one day before the new fiscal year starts. This process of hammering out a bipartisan compromise is now made even more difficult by the administration’s omission.
With the presidential election scheduled for Dec. 19, the National Assembly will be much more pressured to pass the budget bill by the Dec. 2 constitutional deadline this time. In other words, the rival political parties will have to engage in earnest negotiations as soon as the National Assembly opens its 100-day regular session next month.
