새 정부의 공약과 재정건전성

As political business cycle theory of William D. Nordhaus expects economic boom driven by government expenditure increase in the election year, Park Geunhye government presented 140 national policy agenda including huge and structural welfare funding increase for the following 5 years. However, the economic environment of South Korea is not favorable to these policy initiatives. Like other small open economies, we have faced stagnated depression internally as well as globally. Therefore, we need rigorous austerity measures to social-economic expenditures of already setup ones as well as new national policy agenda including welfare expenditure plan. We need triplex composite policy mix of stringent fiscal rule, central government, local governments, and state owned enterprises. We need expanded PAYGO principle for new expenditure proposal and strong rule based expenditure restructuring of already programmed government spending. In addition, we need to reshape of tax expenditure entitlement to the large business groups and target focused on the underground economic activities. For the local finance, we need to balance general subsidies with specific subsidies. Recently, specific grants have been getting larger than general ones and it hinders local governments’ own initiatives. For state owned enterprises, rigorously separated accounting system from general government budget support and full cost pricing of public utility fee policies are strongly recommended.