[Opinion Forum] Supplementary Budget Reduced to “Selling Dog Meat with a Sheep’s Head”

Can a supplementary budget become the priming water that revives South Korea’s stalled economy? The government has pushed ahead with the execution of a supplementary budget totaling about 59.4 trillion won. Of this, 36 trillion won is allocated to supporting small business owners, livelihoods, and quarantine measures, while 23 trillion won is for reinforcing local government finances. However, one cannot help but think that this supplementary budget has degenerated into yangduguyuk (羊頭狗肉).

In announcing the supplementary budget plan, the government explained that it was an unavoidable measure aimed at addressing the economic slowdown caused by the Russia-Ukraine war, strengthening compensation for small business owners affected by the spread of COVID-19, and stabilizing prices. At the same time, it stated that it would also repay about 9 trillion won in government bonds.

Looking at the current supplementary budget, it is like “a sheep’s head with dog meat,” in other words, something that looks plausible on the outside but lacks substance within. Instead of issuing government bonds, this supplementary budget uses additional tax revenue collected last year. While it appears on the surface to be aimed at stimulating the economy and supporting small business owners, internally it is ultimately nothing more than an advance drawn from excessive taxation that infringes on the people’s freedom of economic activity.

National tax revenue collected in 2021 totaled 344.1 trillion won, about 61.4 trillion won more than the originally projected amount. In other words, the Ministry of Economy and Finance made an error in estimating tax revenue. Why did this happen? According to the Ministry of Economy and Finance, “taxes such as corporate taxes paid by large corporations are expected to exceed initial forecasts.” In short, surplus tax revenue arose from taxes generated by economic activity in the market, such as real estate transaction taxes and securities transaction taxes, and this in turn led to the supplementary budget.

The public remembers. The signature economic policies of the Moon Jae-in administration were income-led growth and supplementary budgets. Over its five years in office, the Moon administration spent a total of 150 trillion won through supplementary budgets alone, 1.7 times the amount used by the three preceding administrations combined and the highest figure on record. But did these supplementary budgets revitalize the economy? National debt surged by 400 trillion won, apparently already surpassing 1,000 trillion won, and with high inflation, it is now time to worry about stagflation—a condition in which economic stagnation and rising prices occur together. In the end, tax money created from the people’s blood, sweat, and tears was used to build the administration’s economic legacy, but it was only natural that good results would be hard to expect.

One hopes that the supplementary budget will be properly executed and used where it is truly needed. However, the current government must not follow in the footsteps of the Moon administration. It must clearly recognize that a supplementary budget funded by the people’s hard-earned tax money is not a cure-all. Fortunately, after drawing up this supplementary budget, the government drew a clear line by saying that “unless there is another spread of COVID-19 or a large-scale economic crisis, there will be no further supplementary budget within this year,” and that is worthy of high praise.

This supplementary budget runs parallel to President Yoon Suk Yeol’s oft-repeated statement that “I keep the promises I make to the people.” In that sense, there is some room for extenuating circumstances this time. However, the president has often described himself as a “liberal” who is an avid reader of Milton Friedman’s Free to Choose, and in that respect his words and actions are contradictory. Free to Choose criticizes indiscriminate government intervention and cash-handout policies.

In short, if the president truly is an avid reader of Free to Choose, then going forward he should refrain from supplementary budgets that pour in massive amounts of tax money squeezed out of the people while producing only negligible effects on economic growth. Instead, he should seek to revitalize South Korea’s economy by granting broad economic freedom to businesses and individuals. That, rather than drawing up a supplementary budget that amounts to nothing more than yangduguyuk, is the direction South Korea’s economy should take and the proper course the government should follow.

Junhyun An, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 양두구육(羊頭狗肉)으로 전락한 추가경정예산

Author: Jun-hyeon An

Date: 2022-06-10

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=8&idx=24801