The Korea Herald

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[Editorial] Welfare financing

Cross-party efforts needed to create viable system

By Korea Herald

Published : Nov. 11, 2014 - 19:32

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The presidential office has stepped into the mounting controversy over how to fund a set of welfare programs. In a press briefing Sunday, An Chong-bum, the senior economic aide to President Park Geun-hye, said that during her 2012 campaign, Park had pledged free child care, but not free school meals. He criticized some regional governments and education offices for having allocated too much money for the free school meal program but a small budget for the day care service.

The main opposition New Politics Alliance for Democracy immediately came forward to denounce the Park administration for passing its responsibility for covering welfare costs to provincial authorities.

Days earlier, an association of municipal heads, many of whom are affiliated with the liberal opposition party, declared a virtual default on financing welfare benefits. In a statement issued after their meeting Thursday, 226 mayors and district and county chiefs said they would no longer be able to fund free child care services and the basic pension scheme, another signature benefit program pledged by Park, without assistance from the central government.

But the Park administration dismissed their warning, saying it had already increased its financial support for municipal offices last year.

The escalating dispute over welfare funding will get nowhere if it continues to follow such partisan lines. From the public viewpoint, both the emphasis on free child care and adherence to free school meals seem unbalanced and off point.

The administration and the conservative ruling Saenuri Party are pushing municipal governments and education offices to increase spending on day care for children aged 3-5, saying the implementation of the program is legally required. But no specific plans have been put forward on how to raise the more than 20 trillion won ($18.4 billion) needed to pay for the program during Park’s five-year term.

Likewise, it is not sensible for some municipal administration and education chiefs to be preoccupied with offering free meals at the expense of other programs aimed at improving the school environment and students’ scholastic performance.

At a time of fiscal difficulty exacerbated by a widening revenue shortfall, the conflict over welfare funding will only intensify as long as populist and partisan calculations are placed ahead of rational and comprehensive considerations. Politicians, government policymakers and provincial officials should share the recognition that, under current conditions, the country can no longer afford to foot the bill for universal welfare programs that have been put into practice over the past years.

Korea saw welfare spending grow as a proportion of gross domestic product from 3.8 percent in 1997 to 9.8 percent in 2013. If welfare spending is left unchecked, the national debt will increase to 168 percent of GDP by 2060, according to estimates by the parliamentary budget office.

In these circumstances, it is necessary to hold serious discussions in an open manner over the appropriate extent of public benefits and their pace of expansion. There can be no room for partisan wrangling in this crucial debate. The main parties are required to cooperate in working out an optimal combination of welfare programs within the country’s fiscal limits. If inevitable, they may have to consider whether to raise tax rates despite the negative impact this might have on the sluggish economy.

The country ultimately needs to reach a solid social compromise on a viable and sustainable welfare scheme without being bound by existing pledges. Both parties will end up as losers if they fail to work together toward this goal.