Korean New Deal must restore integrity

Marking the first anniversary of the declaration of Korean New Deal initiative, President Moon Jae-in of South Korea announced the new policy titled “Korean New Deal 2.0.” The newly unveiled policy envisions to expand the scale of investment from 160 trillion won to 220 trillion won by 2025, setting up a new column of “Human New Deal,” alongside with the existing “Digital New Deal” and “Green New Deal.” While the scope of the Human New Deal includes expansion of childcare services, at the center of the deal is a cash grant program for the youth population.

The Human New Deal plans to offer a savings program where those with an annual earning of less than 22 million won who saved 100,000 won every month for three years for the sum of 3.6 million won can receive benefits worth 3.6 million won to 10.8 million won from the government. When the annual income is below 36 million won, they can enjoy 2-4% additional interests from a two-year installment savings program, and those making less than 50 million won a year can subscribe to a fund and enjoy income tax deductions for 40% of the payment. Soldiers who made savings during their years in the military are eligible to get one third of the total savings in the form of a bonus when they are discharged from the service. This requires an annual budget of 2 trillion won, a sum of 8 trillion won for four years.

The juxtaposition of a “Korean New Deal,” a policy resigned to drive the growth of future industries and tackle climate change and a cash grant for youth is awkward to say the least. At best it is an unbecoming attempt to soothe the desperate youth population who can no longer dream to purchase their own home amid the soaring housing prices or get a job in the frozen labor market. It makes little sense to presume they can somehow reconcile with the youth by spending a couple of thousand dollars when housing prices are jumping by hundreds of thousands of dollars overnight.

It is also inappropriate that the Moon Jae-in administration hose term is getting over in less than 10 months is putting a four-year plan in place before exit. Along with the cash programs pledged by presidential candidates, the latest New Deal will rapidly increase the amount of national debt. Korea’s per capita national debt will exceed 20 million won next year. The money spent today will become the debt to be serviced by the younger generation of tomorrow. The plan is not sustainable either. Indeed, many public officers say that the Korean New Deal will be discarded once the presidential race is over next year.

Wiring money to college students and job seekers is the last thing that the government needs to do now. If it were to tackle the skyrocketing home prices, the government must scrap its real estate policy and boost house supply first. Innovative regulations and labor reforms should be the way to go, which will galvanize job and business opportunities and increase investment in job training programs so that the next generation can land a job they were looking for once the COVID-19 is conquered.