[Editorial] Irrational politicians

To leaders of the ruling Grand National Party and the main opposition Democratic Party, the twin sovereign debt crisis in Europe and the United States is a fire on the other side of the river. They are watching the flames without bothering to find out what caused it or learn its lessons.

The main cause of the problem in these countries is their inability to control fiscal spending, especially on welfare. One obvious lesson for Korea is that it needs to be prudent in increasing government expenditure if it wants to avoid getting into a similar predicament in the future.

But few, if any, of the leaders of the two parties seem to heed the lesson from Greece and other fiscally struggling nations. In blithe disregard of the continuing debt crisis, they keep cranking out policies aimed at pandering to the electorate with money from state coffers.

In one latest example, ruling party floor leader, Rep. Hwang Woo-yea, came up with a plan to expand the government’s child care program for children 0-4 years of age. Currently, the government provides child care subsidies to families in the bottom 70 percent of incomes ladder.

Hwang said he would propose a bill that would expand the coverage to all families, regardless of their income. The scheme, he said, would start next year with babies under one year of age and gradually cover toddlers 1-4 years old over three or four years.

Hwang’s plan goes against the ruling party’s selective welfare policy. It apparently contradicts the party’s objection to the DP’s free lunch program for all elementary and junior high students on the grounds that the universal program is a waste of money.

The floor leader explained that his universal child care plan is intended to boost the nation’s woefully low birth rate, a problem that should be given top priority. Hwang’s plan may help the nation raise the birth rate. But the problem is that it is not backed by a solid funding plan. An ill-conceived plan only heightens expectations that often turn out to be difficult to fulfill.

Furthermore, given the worsening sovereign debt crisis in Europe and the United States, the leader of a ruling party should know better than to make a proposal that would increase the government’s fiscal burden.

In another example, the GNP agreed with the DP to propose an outrageous compensation plan for individual depositors of suspended savings banks. The two parties initially agreed to reimburse them for up to 200 million won per person, four times higher than the maximum 50 million won compensation under the current deposit insurance scheme.

It is difficult to understand how the two parties could come up with such a nonsensical plan. Savings bank customers already enjoy a privilege as they are entitled to the same level of deposit insurance protection as that for depositors of commercial bank ― even though they collect higher interest on their deposits.

If the compensation level is raised to 200 million won, customers would rush to savings banks because they can expect better protection as well as higher interest. This would also encourage the banks to take on risky projects, creating a serious moral hazard problem.

In the face of a strong opposition from the government, the two parties reportedly lowered the reimbursement level to 60 million won, but this is still higher than the current deposit insurance ceiling. The government should resist any attempt to go beyond the existing limit.

These and other examples led one GNP lawmaker to lament that the entire political circle has lost reason as parliamentary elections approach. We could not agree more.