The government has finalized the financing plan for President Park Geun-hye’s campaign pledges.
It is the first time a Korean government has come up with a detailed funding scheme to implement the president’s election promises.
To her credit, Park had budget officials clearly show the public how much money would be needed to deliver on her promises and where it would come from.
According to the final plan, a total of 134.8 trillion won would be needed over the next five years to translate the pledges into action. The plan says 84.1 trillion won will come from spending cuts, while the remaining 50.7 trillion won will be raised by reducing or abolishing various tax benefits for companies and the rich.
The new administration’s commitment to abiding by election promises and keeping everything transparent is laudable. Yet the funding plan was greeted with deep skepticism and worry. Budget officials wrestled for almost 100 days to make the plan workable. Yet few think it will work as planned.
Under the blueprint, the government will raise 7.4 trillion won this year, 17.4 trillion won next year, 30.5 trillion won in 2015, 36.8 trillion won in 2016 and 42.6 trillion won in 2017. Given the present economic situation, it is reasonable to allocate smaller portions of the funding requirements to the initial years.
Yet whether the government would be able to raise the required funds in the latter part of Park’s term is uncertain, as it depends on how the economy fares. If the economy continues to grow at a slow pace, the funding scheme will prove unattainable.
The plan calls for deep cuts to infrastructure construction, totaling 11.6 trillion won over the four years starting next year. Yet cutting infrastructure expenditure to increase welfare spending could impede economic growth.
Furthermore, lawmakers of the ruling Saenuri Party are against the cuts, asserting that they would not only deal a serious blow to builders in provincial areas but also spell hard times for party candidates in the next local and parliamentary elections.
Budget officials stressed that there would be no tax hikes to finance the whole scheme. Raising taxes to fund welfare expansion is obviously a step that should be avoided at a time of slow economic growth.
Yet sacrificing infrastructure and other spending is not a wise strategy either. Keeping election promises is a good thing. Yet the government should take the general economic situation into account instead of obsessing about promise fulfillment.
