In its closed-door meeting Tuesday, the Supreme Council of the ruling Democratic Party of Korea decided to push for pandemic relief cash for every person in the country.
The decision went against the party’s earlier agreement with President Moon Jae-in’s administration to give cash handouts to all households except those in the top 20 percent income bracket.
A supplementary budget bill worth 33 trillion won ($28.7 billion), approved by the Cabinet early this month, has set aside 10.4 trillion won to fund the cash relief program.
Under the additional spending plan, the government would also provide 3.9 trillion won to support small merchants and self-employed people, who have suffered business slumps amid the protracted COVID-19 pandemic. To boost domestic demand, 1.1 trillion won has been earmarked to fund cashback rewards for increased credit card spending.
The ruling party’s universal relief plan will require a significant increase in the proposed extra budget unless cuts are made elsewhere.
In a press briefing on the Supreme Council meeting, a spokesperson for the ruling party said there had been discussions on the need to increase the planned supplementary budget. He said he expected the increase to amount to 4.5 trillion won.
In floating the idea of scaling up the proposed extra budget on the same day the National Assembly began its deliberations, the ruling party disregarded the principle of ensuring stability in fiscal management.
Lee Jun-seok, the chairman of the main opposition People Power Party, appears to have helped provide a pretext for the liberal ruling party to push for the universal cash handouts.
In their meeting on Monday evening, Lee agreed with ruling party leader Song Young-gil to give COVID-19 relief cash to the entire nation at a yet-to-be-determined date.
Hours later, the conservative opposition party backtracked on the agreement in the face of strong internal objections to it. A party spokesperson said what Lee and Song had agreed on was to “first use” the proposed extra budget to increase support for small merchants hit by the pandemic, before reviewing the need to expand the scope of the program. But providing more assistance for small merchants would leave little left over for the universal cash relief program.
As critics note, the opposition party leader’s impetuous consent enabled the ruling party to give in to complaints from disgruntled people who were not eligible for the cash handouts.
Attending a parliamentary session Tuesday, Finance Minister Hong Nam-ki reiterated his objection to the idea of providing COVID-19 relief cash to all people. He also remained cautious about expanding the proposed supplementary budget, which was drawn up just four months after the government began implementing this year’s first extra budget, worth 14.9 trillion won, in March to provide support for pandemic-stricken people.
The Ministry of Economy and Finance plans to fund the second supplementary budget with the excess tax revenue, which is estimated to reach 31.5 trillion won this year. Expanding the budget would require the issuance of more state bonds and further undermine the country’s fiscal soundness.
Counting in the latest extra budget bill, annual government spending is set to exceed 600 trillion won for the first time this year, an increase of nearly 200 trillion won from 2017, when Moon took office. Korea’s national debt is projected to rise from 660 trillion won to more than 1,000 trillion won over the cited period, with the ratio of national debt to gross domestic product estimated to grow from 36 percent to nearly 50 percent.
It would be more desirable and efficient to focus on increasing financial assistance for small merchants and self-employed people -- those hit the hardest by the pandemic -- rather than doling out relief cash to all people.
The fourth wave of the pandemic is set to cause huge losses for them, especially now that the government is imposing the strictest social distancing rules in the Seoul metropolitan area for two weeks starting Monday. Under the current circumstances, it is nonsensical to seek to increase cash handouts to spur domestic consumption.
By Korea Herald (
koreaherald@heraldcorp.com)
