[Editorial] Lavish Spending of the Government Causes Burden to the Public

The incumbent government has made “welfare and distribution for those in the low income bracket and the socially marginalized” an excuse for its lavish spending and the resulting rapid increase in the national debt. However, the outcome of loose financial management is shrinking private investment and spending and aggravating the tax burden and livelihoods of the majority of the people. It is hard to find a class which benefits from government’s inefficient and lavish spending of revenues.

The national debt has been rapidly on the rise over the recent few years. This is because the government’s spending grew while economic growth has become sluggish. The Ministry of Finance and Economy announced that the amount of national bonds issued increased by 24.9 trillion won in the first half of this year alone, reaching 200 trillion won in total. That is more than a two-fold increase in a mere 27 months, from 100 trillion won in March 2003 shortly after the government was inaugurated. Lee Chang-yong, a Seoul National University professor, estimated that the ratio of the national debt as a combination of national debt and government-guaranteed bonds per dollar of GDP has already exceeded 30 percent. This is at a point in which the outside world will doubt a country’s financial soundness.

Such a large increase in financial spending should result in even a modest improvement of the people’s livelihoods. However, the number of poor people has increased, exceeding four million. Even the policy office of Cheong Wa Dae has analyzed that the income gap worsened to the level of that of the financial crisis in the 1990s. Its argument is intended to secure more budget for welfare and distribution, rather than to acknowledge the failure of policy. However, the root cause of bipolarization is slow investment and a plummeting growth rate. Unless the government successfully reverses the situation, bipolarization will only aggravate no matter how much the government increases its welfare budget.

The country should reach its growth potential to the maximum to sustain the financial spending resulted from an aging society and a rapid increase in welfare demand, but the reality points to the opposite. The Bank of Korea said that the annual growth rate of facility investment stood at a mere 0.5 percent from 1995 to last year. The figure reached 10.8 percent and 5.6 percent in Singapore and Taiwan, respectively. Less facility investment translates into less future growth potential. Whether it be a country or an individual, a constant increase in spending amid decreasing assets will eventually go bankrupt.

President Roh, who is in the second half of his tenure, should turn his eye to the removal of inefficiency in financial spending and to securing future growth.