Addiction to supplementary budgets

The economy faces a crisis from high interest rates and strong dollar. If the world economy enters a recession, Korea could experience tough times. Politicians must stop their race to supplementary budgets.

“Our government has maintained the highest level of execution of budgets to maximize the role of fiscal policy by minimizing waste,” said a government report on “36 accomplishments in the economic field under the Moon Jae-in administration.” The government’s aggressive fiscal policy ranked 6th among its 36 accomplishments cited in the report published last year. The budget execution rate reached 96 to 98 percent in the Moon administration.

But the administration’s two supplementary budgets last year tells a different story. According to Rep. Yoon Young-seok, a lawmaker from the People Power Party (PPP), the Moon administration did not spend 2.76 trillion won ($1.98 billion) from a total 40.84-trillion-won supplementary budget for 2021, except subsidies for local governments and education. That translates into execution rates of 90.8 percent and 93.1 percent.

Worse, the Ministry of Gender Equality and Family increased the number of recipients for child day care service by 14,000, but the actual number stood at 12,125. The Ministry of Agriculture, Food and Rural Affairs also drew up a plan to support 1,000 farm workers, but only 38 applied for the benefits — both a result of the government’s rush to create temporary jobs and hand out cash without carefully weighing demand in advance.

The Moon administration drew up a whopping 10 supplementary budgets over the past five years and spent over 150 trillion won, even more than the combined 90 trillion won spent by the previous three administrations. Most of the budgets went to a battle against Covid-19, but others were not. Supplementary budget is the money needed to cope with an emergency, but the past government resorted to that habitually and routinely.

The PPP is no exception. The party and its rival Democratic Party (DP) competitively lifted the size of the supplementary budget in January — the first of its kind in the first month of the year — ahead of the March 9 presidential election. Shortly after its election victory, the Yoon administration drew up the largest-ever supplementary budget for small merchants and the self-employed.

Finance Minister Choo Kyung-ho pledged to not arrange a supplementary budget for this year without contingency. As seen in the first-ever supplementary budget in January and the following one for the self-employed after the PPP’s election victory, political circles can change the requirements for a supplementary budget arbitrarily. They are pushing for mandatory fiscal guidelines, but exceptions can be made at any time they want.

The economy faces a crisis from high interest rates and strong dollar. If the world economy enters a recession, Korea could experience tough times. Politicians must stop their race to supplementary budgets.