Even before the government hands out its third tranche of COVID-19 relief funds, the ruling party raised the issue of additional relief for the entire nation.
It mentioned relief for all people ahead of Seoul and Busan mayoral by-elections three months away.
From Jan. 11, the third round of coronavirus relief funds totaling 9.3 trillion won ($8.5 billion) will be doled out to 5.8 million small businesses suffering damage from shutdowns and suspension measures for virus mitigation.
Lee Nak-yon, leader of the Democratic Party of Korea, said in an interview with news media Monday that it was possible to pay stimulus checks to the entire nation after the pandemic recedes somewhat. His remarks signal the party intends to discuss providing universal COVID-19 cash relief separately from the selective third one.
Prime Minister Chung Sye-kyun said that the government needs to encourage economic activity separately from selective relief, considering the whole nation is suffering.
Before the general election on April 15, last year, the current regime promised to offer the first universal emergency relief for all households (1 million won for a family of four), and the ruling party won by a landslide.
The reason the party mentioned the fourth relief fund even before the payment of the third one begins is difficult to explain without noting the upcoming elections.
The government expects to begin coronavirus vaccinations in late February. There is a likelihood that the coronavirus pandemic will settle down to some extent before the April 7 by-elections. The payment period of the universal relief mentioned by the ruling party leader corresponds roughly with the elections. Approval ratings for both President Moon Jae-in and the ruling party are on the slide. It is increasingly necessary to win over voters at all costs to stand a chance of winning the elections.
Last month when it announced the third round of coronavirus stimulus, the government said it would use 4.8 trillion won, or about 56 percent of its reserve fund budget for this year. The reserve fund budget was set aside to respond to natural calamities. If more than half of it is used up for COVID-19 relief at the beginning of the year, a rapid response can be impossible if another disaster breaks out.
Considering 14.2 trillion won spent as coronavirus relief for all households in May last year, the reserve fund budget is far from sufficient to pay for another universal relief fund. An extra budget will be inevitable.
This year’s budget is already the largest ever at 558 trillion won. The national debt was 660 trillion won when the Moon administration was launched, and it is expected to surge to 956 trillion won this year. Add an extra budget to this, and it will be a matter of time before the figure exceeds 1,000 trillion won.
And yet neither the party nor the government is worried about the national debt. They do not feel sorry, either.
It is a step in the right direction to concentrate limited fiscal resources on self-employed people hit hard by social distancing measures. But it is inefficient to dole out relief money indiscriminately regardless of the extent of damage.
The COVID-19 relief fund distributed to every household last year had disappointing effects. According to the Korea Development Institute, it produced the effect of increasing consumption by about 30 percent but failed to induce follow-up consumption. The think tank suggested that relief funds should be selectively concentrated on small business owners rather than all people.
Even if vaccinations proceed as planned, additional reliefs may be needed after the third one. They must be dispensed effectively. But unless anti-market policies change, economic effects of relief money will be short-lived. Repeated relief for all people will only deplete the nation’s ability to restore its economy after the coronavirus pandemic ends.
The Moon administration keeps silent about how to reduce the national debt though it splurges taxes. The ruling party tries to figure out how to throw money at voters through an extra budget even before the already secured budget is executed. As the election approaches, the dark shadow of populism is appearing again.
