[Editorial] Growing Deficit and Mounting Loans

Next year’s expenditure of general accounts is to be increased by 9.5 percent to 131.5 trillion won. The government’s gross expenditure, the sum of general and special accounts, stands at 208 trillion won, exceeding the 200 trillion won mark for the first time, which means the nation’s spending has grown to a substantial level. However, if you look further, you will find that some negative signs such as weakening potential growth power, deepening economic difficulties, and worsening security problems have cast a dark cloud over the nation’s expenditure planning.

Most of all, it is impossible to cover growing expenses with an insufficient income. With the government’s income of 124.7 trillion won including its tax income of 121.1 trillion won, it is 6.8 trillion won short of meeting the scale of the expenditure of the general accounts. Therefore, the deficit is growing and loans are mounting. The national debt in the next fiscal year is expected to top 244.2 trillion won, exceeding by four times the amount of debt in 1997.

However, the figures are only based on a “rosy” scenario. The government has planned next year’s budget based upon a five percent growth rate outlook, while other economic research institutes at home and abroad have projected Korea’s growth rate to be between three and four percent.

The government’s explanation that the growing spending is a sign of gaining potential growth power conflicts with those outlooks. 17.8 percent of the government’s gross expenditure of 208 trillion won for 2005 will be spent on social welfare, which is an increase of 1.3 percent, 10 percent of which will go to the defense budget (an increase of 0.4 percent). Meanwhile, the budget for industry and small and mid-sized enterprises for 2005 has been lowered by 0.4 percent and the budget for Research and Development, closely related to potential growth power, has been increased by only 0.1 percent.

It is true that the government’s role in providing welfare service becomes more important as the economic crisis continues to deepen. However, the nation’s growth cannot be made a scapegoat. We will face continuing vicious circles that continue inviting higher welfare budgets, despite deepening economic downturns, followed by insufficient tax income. The government should understand that strengthening the social safety net through budgeting cannot be the priority of this situation. What should be more urgent is the creation of more jobs through boosting investments. In addition, it is important to emphasize productivity and efficiency in order to create more positive effects with the same amount of budget being allotted to welfare and defense.