Park’s vision of welfare state put into question

President Park Geun-hye made a politically perilous decision Thursday to scale down a new state pension plan as her lofty welfare goals faced harsh reality six months into office.

She made a public apology for failing to keep one of her key pledges that helped her sweep senior citizens’ votes in the presidential election last year.

She is seemingly on a path to further disappoint the public as her other welfare programs are being pushed into retreat amid growing fiscal woes and a still lackluster economy.

Park had promised to expand a wide range of state welfare benefits, for all age groups, during her five-year term.

The basic pension plan was one of the most highly anticipated programs, initially designed to offer 200,000 won every month to all seniors aged 65 and over, regardless of income level.

The government, however, has decided to exclude the top 30 percent income bracket and pay less to existing National Pension subscribers.

Amid criticism, Park defended the change, citing an expected lack of financial resources. She also said the the decision was made in order not to relay a substantial financial burden on future generations.

Her backtracking is becoming a new political weapon for the main opposition party ahead of next year’s local elections.

Other welfare pledges from free child care to wider insurance coverage for serious diseases facing major setbacks.

The government plans to apply the state insurance to all essential treatment for patients of cancer, heart disease, cerebrovascular disorder and rare and incurable diseases by 2016.

Patients will be charged a minimum amount of medical costs ranging from 5 to 10 percent of the total, officials said.

But the plan fails to include other crucial medical expenses which she had vowed to cover, they said.

The president promised that national insurance programs would cover the costs for caregivers and expenses imposed when patients receive treatment from the doctors of their choice and when they upgrade their hospital rooms. The government said it would come up with a follow-up plan by the end of the year, but no major progress has been reported so far.

“The three services that are not covered by the national insurance have imposed a bigger financial burden on patients. But the government is failing to come up with plans to solve these major problems,” said the Citizens’ Coalition for Economic Justice, a major civic group here.

Problems with funding free child care services are also serious.

The government started to offer universal benefits to families with children aged 5 and under in March. But the central government is currently locking horns with municipalities as they face substantial revenue shortfalls due to cuts in real estate taxes and increased welfare spending.

Although the central government promised to increase the subsidy for free child care from 20 percent to 30 percent for Seoul and from 50 percent to 60 percent for other major cities and provinces, municipalities are protesting that the plan falls far short of their fiscal needs.

Park pledged to inject 5.2 trillion won to halve tuition costs for most families, except for those in the top 20 percent income bracket, and another 3.1 trillion won for free high school education. The two plans are lagging as the government struggles with other major welfare operations such as pension and free child care service.

Many cast doubts on the feasibility of the plans. Park, however, has so far reiterated to the public that she can reach the goal even without a major tax increase.

The government said earlier that it will secure 135 trillion won over the next five years to implement 140 state agendas including major welfare plans, by reducing tax exemptions, toughening tax measures against the underground economy and restructuring the state budget.

The plan, however, soon faced a major setback with a drop in the state revenue forecast due to weaker-than-expected economic growth.

Tax revenue this year is expected to fall 7 trillion won to 8 trillion won short of the initial projection, forcing the government to backtrack on its expensive welfare operations. The government did try to secure more income through a tax overhaul plan. But the government soon ended up redrawing its proposal amid escalating criticism from the public and the political circle that it could adversely affect the middle class, and that it also went against Park’s campaign pledge of no tax rises.

To this, experts urged the government to step up efforts to seek public consensus on a tax increase in order to realize Park‘s vision for a welfare state.

“The government should consider various plans to secure more income through tax restructuring, imposing tax on religious groups and raising tax on cigarette products,” said Tchoe Byeong-ho, chairman of Korea Institute of Health and Social Affairs.

By Cho Chung-un (christory@heraldcorp.com)