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[Editorial] Growth in deficit

Lawmakers are demanding an increase in spending next year at a time when they should scale down or abolish projects that are not high priority. Should they have their way in the allocation of budgetary resources, the nation’s fiscal deficit will get out of control.

The spending increases demanded by the 12 standing committees of the National Assembly that have completed their respective budgetary deliberations total slightly less than 11 trillion won. The amount will certainly increase in the days ahead, given that three other standing committees and three special committees have yet to wrap up their deliberations.

Of course, not all demands will be accommodated when final adjustments are made on the administration’s 2013 budget request at the Special Committee on Budget and Accounts before it is put to a vote. Still, many of them will undoubtedly survive the budget ax, with the ruling Saenuri Party and the main opposition Democratic United Party competing against each other in spending on welfare and other programs ahead of the Dec. 19 presidential election.

The demand for more spending could not have come at a worse time. With the economic recovery slow in coming, the government’s revenues are projected to fall far short of target next year.

When President Lee Myung-bak’s administration submitted its 2013 budget request, it projected the fiscal deficit to decline from 1.1 percent of gross domestic product to 0.3 percent, or 4.8 trillion won.

It would not be too farfetched to claim, as the administration did, that a budget with such a small deficit was little different from a balanced budget. But the idea of reducing the deficit to 4.8 trillion won reflected the administration’s wishful thinking, rather than the reality.

President Lee apparently wanted to make a balanced budget one of his cherished achievements when he found it impossible to make good on one of his key 2007 election promises, better know as “747” ― increasing the annual growth rate to 7 percent, raising the per capita income to $40,000 in 10 years and putting the nation among the Group of Seven economies. But his desire to balance the budget was in jeopardy as well when the economy failed to pull itself out of the long-lasting slump.

Among the first to debunk the myth about a balanced budget was the Budget Office of the National Assembly, which said the tax revenues would fall short of the administration’s target by 2.3 trillion won, given that gross domestic product would not grow as fast as the administration assumed when it was writing the budget request. The Budget Office said growth would be at 3.5 percent, instead of 4 percent as the administration projected.

But the Budget Office’s figure might be still overblown, given the lower growth forecasts of the Bank of Korea and the Korea Development Institute, a state-funded think tank ― 3.2 percent and 3 percent, respectively. Private financial institutions and research institutes were even more pessimistic.

The Budget Office, which also said the administration would have a greater shortage in its non-tax revenues, put the total deficit at 18.5 trillion won. Even more alarming was its claim that there would be no balanced budget in the foreseeable future. It said fiscal deficits would hover around the 20 trillion won level ― 20.7 trillion won in 2014, 19 trillion won in 2015 and 19.3 trillion won in 2015.

Against this backdrop, no sane lawmakers would propose to spend more next year, mostly on welfare and infrastructure, as members of the standing committees did. Have they learned no lessons from some of the European countries that lived beyond their means, plunging the global economy into a deep slump?

The Special Committee on Budget and Accounts will have to do what it has done in the past ― cutting the funding for the administration’s proposed projects where possible, in addition to turning down the requests for spending increases from the standing committees. That is what it needs to do, be it an election year or not.

The administration will also have to resist any move to increase spending if it has an iota of concern about balancing the budget. After all, the Constitution prohibits the National Assembly from either increasing any item of expenditure or creating a new item of expenditure without the consent of the administration.