Warnings vs. populist welfare policies

The ruling Democratic Party of Japan, which took power thanks to a pledge of free welfare in the 2009 general elections, is under siege. When it was the opposition party, it pushed populist policies such as childcare allowance, free high school education, and the lifting of highway tolls. The party claimed that it could raise 16.8 trillion yen needed to implement such welfare policies by cutting wasteful government spending.

After taking power, however, the party has cut a meager 700 billion yen through reexamination of government projects. Though Tokyo cut funds for public projects and revamped tax systems, it raised only 3.9 trillion yen or 23 percent of the money needed for its populist welfare policies. With Japan’s welfare budget growing, government spending hit a record high to further increase a budget deficit that is the world’s largest. To tackle this situation, party leaders decided to remove certain projects proposed when it was not in power or cut budget for them if reassessments found them unnecessary. This decision was included in a bill submitted to the party convention Thursday.

In Korea, the main opposition Democratic Party has also presented similar policies such as free school meals, free healthcare, free childcare and lower college tuition. Voices in the party, however, warn of the negative effects of these proposals. Democratic Party lawmaker Kang Bong-kyun, a former finance minister, said, “Measures to finance such policies as presented by the party policy committee are all rubbish,” adding, “In a situation where fears are rising over aggravating fiscal soundness, it is unreasonable to pursue these policies.” Another party lawmaker Kim Hyo-seok, a former business professor at Chung-Ang University in Seoul, said, “They are infeasible.” Other party lawmakers who formerly served as government officials also raised similar fears.

Renowned for their knowledge and experience in policymaking, these lawmakers apparently have warned of the dangers of the party’s populist policies because they do not want to deceive the people and threaten the nation’s future for the sake of taking power. If the party has more lawmakers who strive for the common good, the people will consider it as a force capable of taking power.

The party’s free welfare policies look good over the short term but will burden the people and undermine national competitiveness over the long term. The welfare budget needs a huge amount of taxpayers’ money every year, and cutting spending is difficult once adopted due to public inertia and the political burden. Such policies seem to be free but will increase the public burden by increasing taxes and dampen the vitality of the private sector.

Even employees who pay no income tax will likely see their wages and job welfare decline because their companies have to pay high corporate taxes to sustain welfare costs. In addition, the self-employed will see their profits fall because of lower consumption due to high taxes. Those who do not pay direct taxes will probably have to pay taxes indirectly. If welfare costs rise, indirect taxes will not fall and raise the tax burden on the people. Worse, the working class and low-income households will be at a disadvantage since they will have to share welfare with the rich.

Aside from these disadvantages, excessive welfare will make the people worse off by leading to the economy’s collapse. Lee Hoi-chang, head of the minor conservative Liberty Forward Party, expressed this best Friday by saying, “The so-called universal welfare policies presented by the Democratic Party are irresponsible measures. They will impose a huge burden on the people instead of helping them.”