Fast passage and enforcement, but price impact must be considered
Inconvenient current and former governments to resolve ‘living together’ early
▲ Kwon Seong-dong (left), floor leader of People’s Power, and Choo Kyung-ho, Deputy Prime Minister and Minister of Strategy and Finance, hold a meeting with the party on an additional supplementary budget for compensation for losses of small businesses at the National Assembly on the 11th.
Parliamentary photojournalists
The Yoon Seok-yeol administration held a consultation with the ruling party, People’s Power, yesterday and agreed to form an additional supplementary budget to compensate for COVID-19 losses. Good news. Although social distancing has been lifted, the blow to the self-employed due to the government’s compulsory quarantine measures is indescribable. The party decided to give at least 6 million won per person to 3.7 million people, including the self-employed, regardless of the size of the loss. Although the number of support recipients decreased from the 5.5 million that the Presidential Transition Committee reviewed, it is noteworthy that medium-sized enterprises with sales of less than 3 billion won were included. The fact that the loss compensation ratio was increased from the current 90% to the full amount (100%) and the quarterly payment lower limit was raised from 500,000 won to 1 million won was also welcomed, though late.
To this end, the People’s Power requested the government for an additional budget of 33 trillion won + α. The government also decided to provide emergency support for living expenses for the low-income class following the recent high inflation. Support will also be provided to the travel industry and performance exhibition industry, which were excluded from compensation for losses last time. If this happens, the total additional budget is expected to be between 36 trillion and 37 trillion won. The government plans to submit the final scale to the National Assembly tomorrow following confirming the final size at the cabinet meeting today.
Park Hong-geun, floor leader of the ruling Democratic Party of Korea, which has become a huge opposition party, said, “The astronomical excess of 53 trillion won (to be used as a supplementary budget) is a serious problem,” he said. When they were the ruling party, they might be dissatisfied because the government had been holding on to the fact that there was not much excess tax revenue. However, ‘quick and complete compensation for the corona virus’ is an issue that the Democrats have insisted on. It is not something to waste time discussing the ‘intentions’ of the budget and tax authorities. Considering the unfavorable economic turmoil inside and outside the country, we need to cooperate in resolving the ‘cohabitation cabinet’ of the previous and current governments as it is a pity that every minute and every second of the state vacuum is disappointing.
The government should closely examine the impact of this additional budget on inflation. The decision not to issue government bonds that directly affect inflation and interest rates is a good move. The government’s plan is to reduce spending and cover the full amount of the supplementary budget with more tax collected, but in reality, it is highly likely to depend on excess tax revenue rather than expenditure restructuring. When money is released, it can only stimulate prices. It is necessary to properly distribute the timing of the payment of corona compensation and cash welfare, and to thoroughly block patronage money conscious of the June 1 local elections. It goes without saying that vicious practices such as unreasonable tax audits should not be repeated to procure tax revenue.
