[Editorial] Growing debt

The nation is set to make a change in its accounting method from cash to accrual this year. One of its consequences is a rise in the measurement of national debt.

The government has yet to announce by what margin the new accounting method would readjust upward the debt, which was posted at 359.6 trillion won at the end of last year. But the opposition Democratic Party has already come up with a new figure ― 476.8 trillion won.

True, the change in accounting method does not bring any intrinsic difference to the actual debt amount. It simply means looking at national debt from a different angle.

But it did not take long before the opposition party calculated national debt by the new accounting method because it wanted to make use of it in attacking President Lee Myung-bak’s administration. It indeed said that the nation incurred a huge amount of additional debt as a result of the Lee administration’s “tax cuts for the rich and big-ticket civil works projects.”

The political offensive aside, the readjusted debt figure is a cause of concern for the Lee administration, which has until recently claimed that national debt poses no serious problem because its ratio to gross domestic product is very low. If the opposition party’s figure is correct, the ratio would soar from 34 percent to 44.9 percent, though it would still be well below the OECD average of 90.6 percent.

If no action is taken to slow the pace of national debt growth, however, the debt-to-GDP ratio will certainly near that of the financially pinched Spain ― 62.4 percent ― before long.

The public finance is vulnerable to entitlement growth as the population is fast aging. A sudden reunification with North Korea would be another cause of concern. Against this backdrop, the new debt measurement should serve as a warning against profligacy.