No reckless election pledges

The International Monetary Fund advised Korea to expand selective welfare and secure a variety of tax revenue sources. Hit hard by the 1997 currency crisis that threatened its international creditworthiness, the country had no choice but to ask for a bailout from the fund, which dictated the terms for Korea`s economic restructuring. The fund objectively evaluated the Korean economy and offered advice, and Korea needs to heed that advice.

An increase in welfare spending is inevitable to narrow social inequality and secure economic growth engines. Though Korea`s welfare spending is below the average of the Organization for Economic Cooperation and Development, state coffers should be used in an extremely cautious manner given the rapid aging of the Korean population. In this regard, money should be used selectively and channeling money into childcare or career education is appropriate. Korea has one of the lowest tax rates in the OECD, with per capita tax at 22 percent. With the economy in a down cycle, the tax burden focused on certain people and a universal welfare system could increase the people`s dependence on the government, ultimately depleting state coffers fast.

The reunification of the Korean Peninsula will require huge costs. Fiscal spending will surge if the welfare pledges put forth by the ruling and opposition parties are implemented. The Korea Institute of Public Finance predicts the national debt will exceed 160 percent of GDP by 2050, way over the level in Southern European countries. Excessive welfare spending enables a better life for this generation but will make things for the next. Presidential candidates and politicians should refrain from making excessive welfare pledges and start worrying about maintaining fiscal soundness. The government should elaborate on a transparent and objective supervision system on the effects of welfare pledges on long-term fiscal conditions and how revenue sources can be obtained.

A forum for fiscal soundness will be launched soon by some 100 former government economy officials and journalists. How fortunate that former high-ranking officials are banding together regardless of political affiliation. Former Construction and Transportation Minister Choi Jong-chan, who is co-chairman of the forum, said, "Populist fiscal pledges are pouring out, but no serious discussions are being made on their fiscal impact." The forum should hold in-depth research and discussion on raising fiscal soundness and block out reckless welfare pledges.