Political logic distorting economics

It is a characteristic of politics that when tax revenues surpasse the estimated budget level, the government is apt to use the surplus money for the maintenance of power and winning elections. The Budget Accounting Law provides for mandatory stipulations for the administration to spend the fiscal surplus funds with a priority on paying back the national debt or loans, or national compensation. These provisions of this law can be said to be aimed at preempting the ruling power from using the money for political purposes.

The projected finance viability law now under consideration by the ruling Millennium Democratic Party (MDP) is designed to use the surplus revenue for financing the revised-supplementary budget prior to the repayment of national debt, but this has raised the possibility of aggravating financial unsoundness. If there is a fiscal surplus, the funds ought to be appropriated for repayment of national debt first. Then, if any surplus money is still left, the funds can be earmarked for financing the additional spending bill with the consent of the National Assembly.

Last year, some 8 percent of the total budget or 7.5 trillion won was spent as public funds injected into businesses or for the repayment of the national debt. Hence, the national finances cannot be said to be healthy at all. Out of the public fund injections totaling 104 trillion won, the unrecovered portion of the money will become a heavy financial burden on the nation in the long run. The task of reducing the national debt, which has increased rapidly since the outbreak of the financial crisis in 1997, is crucial for grappling with any new economic crisis and reducing the financial burden on the next generation.

The stipulation in the draft law that makes it possible for government agencies to advance the use of the fiscal surplus only with a presidential sanction is undeniably a vicious article. The scale of the fiscal surplus is confirmed by the budget accounting undertaken by the National Assembly around October every year. That the administration spends the surplus funds without parliamentary approval amounts to an infringement upon the Assembly`s authority to deliberate and settle the national budget bills.

This year, few elections are scheduled. Consequently, the government can afford to carry out structural reforms and strengthen the nation`s financial position regardless of public popularity. Nevertheless, the government has been regrettably preoccupied with preparations for the local and presidential elections next year. As a result, it has been unable to make the most of this opportunity for building a healthy economy.

The time has gone when pork-barrelling budget outlays were effective methods of garnering people`s votes. This is an act that disregards the voters. The ruling MDP, owing to concern that people are being alienated from the ruling camp, seems to be hell-bent on currying favor with the people by various reckless policy measures, such as the injection of large amounts of pension funds into the stock market or increases in the preferential disbursements of fiscal funds. However, such mass-oriented economic policies based on political necessities cannot ensure that the ruling party will realize its political aims, but they will lead to a deterioration of the economic situation in the long run.

The ruling MDP should respect economic principles to the maximum extent, so as to forestall economic-related government agencies from riding on the wagon of political logic.