The Korea Development Institute (KDI), the government-run research institute, pointed out Thursday that it is more desirable to channel the fiscal policy for 2022 toward providing targeted assistance to hardest hit segment and making transition of economic structure, suggesting that it is better to provide focused support for the marginalized, who were directly hit by the COVID-19 pandemic, rather than to provide cash subsidies planned for January 2022 to the entire population, as ruling Democratic Party’s presidential nominee Lee Jae-myung campaigns for. The KDI also recommended that a rapid increase of government debt needs to be controlled in a tighter range.
The economic outlook for the second half of the year released by the KDI stated that although South Korea’s export growth has been slackening lately, but as consumption has begun to show signs of recovery with the start of the phased return to normalcy, fiscal policy needs to be tightened. Providing cash subsidies to the entire population amid increased inflation concerns may heighten inflation rate, which has already surpassed 3%, and fail to invigorate the economy as planned.
Yet the ruling Democratic Party is aggressively pushing ahead with an initiative to include relief funds for COVID-19 pandemic response in next year’s budget, the gist of which is to provide 250,000 won per person. The ruling party demands that the government have the tax revenue to be collected by the end of this year carried forward to the next year to arrange the budget required for the pandemic relief funds amounting to a total of 12.9 trillion won. “There are prerequisites for deferment stipulated in the National Tax Collection Act,” said Economic and Finance Minister Hong Nam-ki. “The administrative branch cannot just arbitrarily allow deferment, as it would be against the law.” Nevertheless, the Democratic Party appears to be ready to press ahead with the scheme, arguing, “Giving tax deferments is against the law is a fake news.”
When asked whether an increase in budget proposal by the ruling party, as campaigned by the presidential nominee, constitutes a violation of the Public Official Election Act, the National Election Commission responded that any conduct by state agencies that might have a prejudicial effect on election results must be avoided to the fullest extent possible, stating in a roundabout way that there is a possibility of law violations. Yet the ruling party uses the pandemic response as a pretext for giving cash subsidies to deceive the people by describing the funds as “the price for masks, which the people have been wearing for nearly 500 days, and possibly even longer.”
Redrafting the budget proposal on the sole basis of the presidential nominee’s comments is tantamount to desecrating the country itself, which puts a dent on South Korea’s status as the 10th largest economy in the world. The ruling Democratic Party must stop its initiative to provide relief subsidies to the entire population through fraudulent budget planning and find practical ways to help the marginalized who are excluded from pandemic relief funds.