The national debt rose more than 126.9 trillion won or 8.2 percent to 1,682 trillion won in a year, according to the “Settlement of Accounts for the Fiscal Year 2018” reviewed at the cabinet meeting Tuesday. Despite the fact that a rise in national debt is inevitable, the national debt is growing at a too fast pace.
A rise of 94.1 trillion won in military and public service pension appropriation debt, which refers to liabilities payable to public servants and military pension beneficiaries converted to current value, was attributable to the overall debt increase. Despite the circumstances, the government has done nothing to reform the public servants and military pension program. Rather, it is planning to newly employ 170,000 public servants, making it unlikely that the national debt will fall down the road. Moreover, next year’s budget is expected to exceed 500 trillion won for the first time. The government is seeking to find every reason to draft a supplementary budget. It is not an exaggeration to say that the government is addicted to fiscal spending to bolster the economy.
Fiscal expansion means higher taxes for businesses and individuals, and greater government spending than the amount it collects in tax revenue. Bigger roles by the government would lead to a contraction in private economic activity and an absence of powerful means to deal with unexpected external shocks, such as the Asian financial crisis in 1997. Furthermore, a rise in national debt is like putting an economic burden on our future generations.
To be sure, it is natural to emphasize the role of fiscal spending in economic downturns. International organizations such as the Organization for Economic Co-operation and Development (OECD) have advised the Korean government to create a supplementary budget as Korea’s fundamental strength is better than that of other advanced economies. But we should not let our guard down as our financial integrity is deteriorating at a fast pace.
Spending within the budget is the basics for a household and a country. Even if a household or a country takes out a loan or increases spending, it should at least have a plan to pay its debt when things improve. For the sake of future generations, the government should overhaul its long-term fiscal plan to maintain its financial integrity and work on much-needed pension reform without further delay.