Explanations needed on funding welfare pledges

Japanese Prime Minister Yoshihiko Noda has made an apology to his people for failing to keep election pledges that his party recklessly made ahead of the general elections three years ago. In the next election, he promised to make pledges that his party can keep. The ruling Democratic Party of Japan took power in the 2009 general elections by pledging free welfare programs, including childcare subsidies, no expressway tolls and free high school education. But Tokyo failed to generate the necessary tax revenue due to its economic crisis, and was also in no position to adjust the budget due to Japan`s astronomical national debt of more than 1 quadrillion yen (12.6 trillion U.S. dollars). This made many of the party`s election pledges blank promises.

In this year’s presidential election in Korea, candidates are presenting attractive welfare pledges such as free childcare for children up to age 5, doubling of the amount of basic pension paid to retirees, and halving college tuition. They are also revisiting election pledges that past governments failed to deliver, including the expansion of state and public childcare facilities (Park Geun-hye, Moon Jae-in, and Ahn Cheol-soo) and a hike in basic pension paid to senior citizens (Moon and Ahn). All of them, however, have remained tightlipped over how they will obtain the necessary funds. Park, the candidate of the ruling Saenuri Party, has merely given basic principles, proposing cutting spending and expanding tax revenue. Moon’s camp has made excuses on the pretext of the opposition`s process of choosing a single candidate. Ahn’s side, which even released a report of his election pledges exceeding 400 pages, has declined to give direct answers, merely saying, “Please wait a bit longer.”

Failing to clarify how they will mobilize the necessary funds, something which the public wants to know the most, effectively means admitting that their pledges were ill-prepared at best. Even if taxes on the conglomerates and the rich are raised, the increase in tax revenues will reach just a few billion dollars per year. Tax hikes will also cause significant side effects, including reduced investment and capital flight. Adjustment of government spending and raising the transparency of the tax base are pledges that have been repeatedly made over and over again in previous elections. The Sound State Finance Forum said that if the government is to implement all of the welfare pledges, Saenuri`s promises will require an extra 8 trillion won (7.3 billion dollars) on average per year over five years, and those of the Democratic United Party will incur an additional 24.5 trillion won (22 billion dollars) per year, even considering measures to expand tax revenue as announced by the candidates` respective parties. The runners should be judged by voters after announcing detailed plans on how much money they will raise and from where.

The national budget for next year as presented by the government is 342.5 trillion won (314 billion dollars). If GDP growth falls below Seoul`s estimate of 4 percent due to a sluggish economy, the government will inevitably face a deficit in revenues from taxes such as corporate tax and personal income tax. Despite this, the ruling and opposition parties are scrambling to get their welfare pledges reflected in the budget as much as possible. Ignoring the government’s right to set the budget and the National Assembly’s authority to review the budget plan, the Democratic United Party has demanded that 3 trillion won (2.76 billion dollars) to 4 trillion won (3.67 billion dollars), or about 1 percent of next year’s budget, be set aside for the next president to use to implement his or her election pledges. Neglecting the status of state coffers, the party is moving to wield power even before the next chief executive is elected.