[Column] Get out the long underwear and a thick jumper

As usual, the government — or political circles — demands citizens tighten their belt along with a promise to provide more support for the vulnerable. On listening to the cliché, my mixed feelings got even more mixed.

Kim Chang-woo

The author is the national news editor at the JoongAng Sunday. This winter is extremely cold. The outside temperature plunging below minus 10 degrees Celsius (14 degrees Fahrenheit) forces you to hunch your shoulders. Back home, you shrink further due to the chill from ratcheted-down heaters after energy prices soared. Looking at a monthly utility bill 200,000 won ($162) higher than last January, you feel a different kind of chill.

The abnormally low temperatures at home directly resulted from a whopping 38.5 percent increase in home LNG prices last year after a rapid surge in international gas prices. The price of 1 million BTU (1 BTU equals 250,000 kilojoules) in the Dutch TTF Natural Gas Futures did not exceed $2 until the spring of 2020. But the price shot up to $27 by the end of 2021 and to $69.3 in September 2022 after the Russian invasion of Ukraine in February that year. The international price recently went down to $35, but is still at a high level.

The Yoon Suk Yeol administration and the People Power Party (PPP) pin the blame on the Moon Jae-in administration. Choi Sang-mok, senior presidential secretary for economic affairs under Yoon, attributed the rapid rise in home LNG prices to the Moon administration’s reluctance to raise prices for a couple of years even while the United States lifted them 330 percent, the UK 260 percent and Germany 360 percent last year from their levels in 2021. “Korea’s gas price is still overly low, as it stands at 23 percent to 60 percent of the prices of those countries,” he said.

PPP floor leader Joo Ho-young attacked the past government for shifting the responsibility for lifting energy prices onto the Yoon administration. “The current government and the vulnerable class are the victims of the energy populism of the previous administration,” said the five-term PPP lawmaker. In response, Democratic Party (DP) Chair Lee Jae-myung criticized the Yoon administration for its inability to find solutions even though increased gas prices were already expected. “The government habitually put the blame on the previous government,” Lee retorted.

But such tit for tat does not help people get through a harsh winter. The Yoon administration decided to double the payment amount of energy vouchers to 300,000 won throughout the winter and double gas subsidies for the poor to 72,000 won a month. Despite the twofold increase, it is questionable if the underprivileged could really survive the cold spell this year.

The tax burden on the middle class is a more perplexing question. The DP proposed a 7.2-trillion-won subsidy for soaring energy prices and a 30-trillion-won supplementary budget for a comprehensive recovery of public livelihoods. Seven trillion won is enough to offer 140,000 won to each citizen and 30 trillion won is big enough to dole out 600,000 won to everyone. If all the money is spent, it could help alleviate the deepening financial pain of the weak class from their skyrocketing energy cost.

But the question is how to fund the budget. DP Chairman Lee has proposed to impose a sort of windfall tax on energy companies which raked in a hefty profit from soaring energy prices. Britain decided to temporarily raise the tax rate for its energy enterprises by 10 percentage points while the European Union chose to collect a windfall tax from energy companies in the form of a joint contribution.

But that provoked controversy over the responsibility for possible business losses and side effects from additional taxation, as it distorts the market. The DP is considering an additional issuing of national bonds to help fund the generous handouts. The Yoon administration denounced it as a populist move, but stopped short of actually presenting substantial alternatives to the idea.

There is no free lunch. The Moon administration resolved the soaring energy prices by issuing government debt instead of raising utility prices. As a result, government debt, which stood at 660 trillion won in 2017 — the first year of the liberal administration — escalated to 1,068 trillion won last year. Due to the record-high 3.5 percent interest rate of national bonds, the government must pay 40 trillion won each year as interest alone. That burden can be relayed to the next generation or be reduced by raising taxes now.

As usual, the government — or political circles — demands citizens tighten their belt along with a promise to provide more support for the vulnerable. On listening to the cliché, my mixed feelings got even more mixed. I have to put on long underwear and a fleece jumper at home. Maybe I also need a thicker blanket, or two of them, and a beanie before I go to bed. In the 2009 movie “A Christmas Carol,” miserly businessman Ebenezer Scrooge wearing a thick night gown and a night cap looked miserly indeed. But it could have been a part of his battle to survive a harsh winter on Christmas Eve in 1843 in London.