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Fiscal affordability matters

May 29,2017
The education ministry, eager to score with the new liberal administration, told an advisory committee for state affairs in charge of mapping out public policies that the government should cover the so-called Nuri program, public subsidies on day care for 3- to 5-year-olds.

The program had been tossed among central and local governments due to the dent on public finance. The ministry of finance responsible for overseeing the state budget of 400 trillion won ($357.5 billion) and fiscal integrity claimed that policy has not been discussed within the government. The day care subsidy is nearly 4 trillion won a year.

The program had been a hot potato under former president Park Geun-hye. The Ministry of Education has said that it cannot provide more than 1.8 trillion won to cover kindergarten and demanded local education offices shoulder the pre-kindergarten cost of 2.07 trillion won through its share of the 20.3 percent from domestic tax revenue.

The local education offices sit on bigger revenue as its share to tax revenue remains unchanged while the number of students has been decreasing. Yet the government has been subsidizing 860 billion won, or 41.2 percent of the day care budget, starting this year due to protests from local education authorities. The finance ministry had planned to fix the loophole in next year’s budgetary bill. But the planning and advisory committee maintains that it will keep the budget alive to uphold Moon’s campaign promise of free day care.

The policy confusion is unsurprising. About 178 trillion won is needed to meet Moon’s vows of child allowances and increases in pension, salaries for soldiers, public-employee hiring, and the purchase of rice. If the finance ministry blindly reflects the new spending plans without thoroughly studying their sustainability and impact on fiscal integrity, Korea’s public balance sheet could be ruined.

It is how Greece and Venezuela arrived on the brink of bankruptcy. The Moon administration must pursue campaign vows relative to fiscal affordability and sustainability.

JoongAng Ilbo, May 27, Page 26