Spending plan should focus on fairer distribution
The Korean and U.S. legislatures' approvals of their government's budget bills for 2023 last week were both similar and different.
Both the National Assembly and the House of Representatives passed central government budget bills just before Christmas Eve, averting shutdowns at the 11th hour.
Their similarities ended there, however.
The two governments showed contrasting reactions to the news. In Seoul, a presidential spokesman expressed regret, saying, "The budget for people's livelihoods was tarnished due to the majority opposition's power." In Washington, President Joe Biden said, "This bill is further proof that Republicans and Democrats can come together to deliver for Americans."
One might think that Korea's Assembly was partisan and the U.S. Congress was bipartisan. The reality was the opposite. In Korea, the bill passed 251-4, with 18 abstentions, in a 300-seat assembly. In America, the House approved it by a vote of 225 to 201, on nearly party lines.
Diverging even more was the respective content of their spending plans.
To sum up, the Yoon Suk-yeol government focused on growth. So, it cut corporate taxes, delayed heavier taxation on owners of multiple homes and reduced levies on financial investors, banking on a hardly existing "trickle-down effect." In contrast, the Biden administration raised taxes on the rich and expanded welfare for middle- and low-income people.
Of course, Korea's 638 trillion won ($497 billion) budget for FY2023 includes some welfare spending for the public. However, considering that the budget is primarily a zero-sum game, more benefits for relatively wealthy people mean the deprivation of the more vulnerable classes. For instance, in August, Yoon visited and comforted people living in a semi-basement flat hit by flash floods. Yet, his budget cuts spending on subsidizing the purchase or rental of multifamily homes by 3 trillion won or more.
Indeed, Yoon's economic policy, reflected in his budget proposal, runs counter to global trends.
The conservative president criticized his more liberal predecessor, Moon Jae-in, for being a populist. However, Yoon's "conservative populism" is more similar to the likes of the deposed Donald Trump or Liz Truss. The incumbent U.K. government has raised tax rates to the highest level since World War II. Some European governments are even considering introducing a "windfall tax" on the nouveau riche to enhance fiscal health and expand the social safety net for the weakest in society.
Yoon said he would run the national economy to achieve a $40,000 per capita gross domestic product by 2027. Given that the current per capita GDP is $35,000, the goal of $40,000 may be attainable even amid the harsh global economic climate. Interestingly, his two conservative predecessors ― Lee Myung-bak and Park Geun-hye ― made the same pledge.
However, it is hard to know whether these leaders need to learn global trends or basic economic concepts. Consider this: in an era of a per capita GDP of $40,000, a four-member Korean family must earn 182 million won a year to be average. However, only the top 10 percent of families based on income earn this much. The median income of a four-member family is 61.45 million won. The gap between the two amounting to nearly three times shows Korea's level of income disparity. It also explains why some "advanced" countries no longer stick to per capita GDP for their economic goals.
As the London-based Economist says, some Western governments no longer prioritize economic growth. Instead, they care more about healthcare and other welfare programs. As the magazine analyzes the current situation, this shift reflects the rapid aging of the population, older people's voting power, and difficulties in economic policymaking amid the increasing power of social media.
What meaning will it have if Korea boasts a per capita GDP of $40,000 or even $50,000 if the nation's suicide rates, especially those of teens and older adults, remain the highest in the world?
Also, Korea may have to increase the pie, but when will redistribute it a little more evenly? Whom will Koreans select in the next elections: liberals, compassionate conservatives or blind believers in GDP?
The Korean and U.S. legislatures' approvals of their government's budget bills for 2023 last week were both similar and different.
Both the National Assembly and the House of Representatives passed central government budget bills just before Christmas Eve, averting shutdowns at the 11th hour.
Their similarities ended there, however.
The two governments showed contrasting reactions to the news. In Seoul, a presidential spokesman expressed regret, saying, "The budget for people's livelihoods was tarnished due to the majority opposition's power." In Washington, President Joe Biden said, "This bill is further proof that Republicans and Democrats can come together to deliver for Americans."
One might think that Korea's Assembly was partisan and the U.S. Congress was bipartisan. The reality was the opposite. In Korea, the bill passed 251-4, with 18 abstentions, in a 300-seat assembly. In America, the House approved it by a vote of 225 to 201, on nearly party lines.
Diverging even more was the respective content of their spending plans.
To sum up, the Yoon Suk-yeol government focused on growth. So, it cut corporate taxes, delayed heavier taxation on owners of multiple homes and reduced levies on financial investors, banking on a hardly existing "trickle-down effect." In contrast, the Biden administration raised taxes on the rich and expanded welfare for middle- and low-income people.
Of course, Korea's 638 trillion won ($497 billion) budget for FY2023 includes some welfare spending for the public. However, considering that the budget is primarily a zero-sum game, more benefits for relatively wealthy people mean the deprivation of the more vulnerable classes. For instance, in August, Yoon visited and comforted people living in a semi-basement flat hit by flash floods. Yet, his budget cuts spending on subsidizing the purchase or rental of multifamily homes by 3 trillion won or more.
Indeed, Yoon's economic policy, reflected in his budget proposal, runs counter to global trends.
The conservative president criticized his more liberal predecessor, Moon Jae-in, for being a populist. However, Yoon's "conservative populism" is more similar to the likes of the deposed Donald Trump or Liz Truss. The incumbent U.K. government has raised tax rates to the highest level since World War II. Some European governments are even considering introducing a "windfall tax" on the nouveau riche to enhance fiscal health and expand the social safety net for the weakest in society.
Yoon said he would run the national economy to achieve a $40,000 per capita gross domestic product by 2027. Given that the current per capita GDP is $35,000, the goal of $40,000 may be attainable even amid the harsh global economic climate. Interestingly, his two conservative predecessors ― Lee Myung-bak and Park Geun-hye ― made the same pledge.
However, it is hard to know whether these leaders need to learn global trends or basic economic concepts. Consider this: in an era of a per capita GDP of $40,000, a four-member Korean family must earn 182 million won a year to be average. However, only the top 10 percent of families based on income earn this much. The median income of a four-member family is 61.45 million won. The gap between the two amounting to nearly three times shows Korea's level of income disparity. It also explains why some "advanced" countries no longer stick to per capita GDP for their economic goals.
As the London-based Economist says, some Western governments no longer prioritize economic growth. Instead, they care more about healthcare and other welfare programs. As the magazine analyzes the current situation, this shift reflects the rapid aging of the population, older people's voting power, and difficulties in economic policymaking amid the increasing power of social media.
What meaning will it have if Korea boasts a per capita GDP of $40,000 or even $50,000 if the nation's suicide rates, especially those of teens and older adults, remain the highest in the world?
Also, Korea may have to increase the pie, but when will redistribute it a little more evenly? Whom will Koreans select in the next elections: liberals, compassionate conservatives or blind believers in GDP?
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