There is a continuing debate over the 4th disaster support payment method. On the afternoon of December 29, last year, a notice informing about the lease was posted at a shopping district in Jongno, Seoul. By Kim Myung-jin, staff reporter, [email protected]
As early as March-April, the 4th disaster support fund will be paid to overcome the damage of Corona 19. Regarding the payment method, the ruling and opposition parties as well as the party government are arguing. Even before the first disaster support payment in May of last year, debate arose over the effects of selective payment, universal payment, and subsidies. The controversy over the 4th subsidy has spread as a conflict between the ruling party and the Ministry of Strategy and Finance opposing universal payments to provide both universal and selective support, but fundamentally, it is also about the purpose, principle, and direction of the disaster subsidy policy. After the coronavirus outbreak, the government paid disaster assistance three times. In the first round, it was the target of’the whole nation’. Regardless of income and wealth, it paid 14.3 trillion won in a’universal support’ method that gives up to 1 million won per household. The 2nd and 3rd disaster subsidies were different from those of the 1st. It was a customized’selection support’ method for small businesses affected by damage. Rather than the purpose of revitalizing the economy by boosting consumption, the focus was on the method of directly supporting the victims of the government’s quarantine measures. The 2nd subsidy amounted to 7,8 trillion won and the 3rd, 9,3 trillion won. However, the amount of direct support in the third round was 6,1 trillion won, which was less than the level of the second aid. The country that first introduced disaster subsidies was the United States during the Great Depression of 1929. At that time, the first purpose of the support policy was to’promote consumption’, and then’to preserve income’ (maintain a living). A close precedent is that during the 2008 financial crisis, similar forms of support were provided in the United States, Taiwan, and Japan. What principles and directions are best for us to apply? Lee Sang-yi, co-representative of the Social Welfare Society (Professor of Jeju National University) said, “Before discussing how the 4th disaster subsidy will be paid, it is necessary to analyze the policy effect of the first disaster subsidy.” It takes time to analyze the effects of the 2nd and 3rd disaster subsidies, and especially since the 3rd support is still in progress, we have no choice but to refer to the analysis results of the 1st disaster subsidy. As for the analysis of the effects of the first disaster subsidy, the results of research by the Korea Development Institute (KDI) and Gyeonggi Province have been published. The problem is that both sides produced completely opposite research results. Gyeonggi-do claims that the first disaster support funds paid to residents of the provinces led to a consumption effect of 1.85 times the amount paid. For example, they received 100,000 won in disaster support and spent 180,000 won. As a result of analyzing the effect of 5,1190 billion won, which was the sum of the disaster basic income of the province, to the disaster support fund received by the government of 13 million residents of Gyeonggi Province, Gyeonggi Province counted that there was a total consumption expenditure of 7.74 trillion won. According to Gyeonggi Province’s analysis, it was 1.51 times the input budget and 1.85 times the effect of boosting consumption when analyzed assuming that there was no disaster support fund at all. However, this is very different from the analysis results of national research institutes. In the report’Effects and Implications of the First Emergency Disaster Subsidy Policy’ prepared and published by Kim Mi-ru and Oh Yun-hae, researchers at the Korea Development Institute, the effect of boosting consumption of the first disaster subsidy was only about 30%. This study analyzed the effect of increasing consumption of the first disaster support fund through the increase or decrease of card sales compared to the same period last year, and it was estimated that the amount of card sales increased through the disaster support fund in the usable industries was 4 trillion won. This is equivalent to 26-36% of the input resources. The researcher estimated that the rest would have been spent paying off debts or saving money, not consumption. It means that they received 1 million won and spent only about 300,000 won, but at the time, the expiration date and the place of use were fixed, so it should be considered that they were actually used up. However, it means that the’substitute consumption’ for 1 million won means that the original amount of money was not spent and saved. It’s natural in some way that if you tell them to spend cash-like money for a while and give them away, it will increase consumption. The difference between the results of the two studies seems to be due to the method of estimating the comparison value that calculates the effect. Gyeonggi-do calculated the effect of increasing consumption by comparing the amount of consumption expenditures generated from April to August when the disaster subsidies were paid to those of the same period of the previous year. The limitation is that it does not take into account the effects of deferred consumption (retributive consumption) that increased consumption expenditure, which was delayed, and the effects of government policies such as lowering individual consumption tax for automobiles. It is unreasonable to conclude that the various factors that have influenced the increase or decrease in consumption are’the economic effect of the disaster subsidies’. Although the Korea Development Institute calculated it taking into account the consumption recovery tax and the effect of deferred consumption, some point out that the effect of disaster subsidies should not be evaluated solely by boosting consumption. Because the so-called’multiplier effect’ that the disaster subsidies provided to the nation has on the overall economy, such as preserving household income, increasing consumption, and boosting domestic demand, appears 1 to 2 years later, it is also limited to assess the effect with only a limited period of analysis .
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How the 4th disaster subsidy payment method will be concluded remains to be observed more closely with the coordination of the party and the opposition parties. In this regard, Nak-yeon Lee, the leader of the Democratic Party, said in a speech to the National Assembly on the 2nd, “We will prepare the 4th disaster support fund in a sufficient size without delay through the formation of an additional budget.” said. Although the revolt of the Ministry of Information and Materials against universal payments will act as a variable, compromises are discussed in the political world. However, in a situation where the weight of this disaster subsidy should be concentrated on the victims and thicker support, the parallel screening and universal payment card that was taken out ahead of the Seoul-Busan by-election in April is populism to overwhelm dissatisfaction with the screening support. It has a lot of potential to stir up a dispute. Seok-jin Woo, a professor at Myongji University (economics), said, “It is much more effective to do it if you can select it because it is difficult.” “The crisis is much longer and deeper than in the first period. Through the year-end settlement of last year, it will be possible to determine who was further hit.” The scale of the 4th disaster subsidy is expected to be much larger than that of the 2nd and 3rd subsidies, which were centered on the underprivileged classes such as small business owners and specially employed workers. If the general payment is made simultaneously with the selective payment of loss compensation to the victims, the overall budget is likely to exceed 20 trillion won. Funding is discussed through the issuance of deficit government bonds, and controversy over fiscal soundness is expected to rise again. Amid controversy over the 4th disaster subsidy payment method, Gyeonggi-do began to provide’basic disaster income’ of 100,000 won per person to all residents from the 1st of this month. Gyeonggi-do’s disaster income payment is the second after last year.
Hong Dae-sun Research Fellow, Hankyoreh Economic and Social Research Institute [email protected]