‘Election rehabilitation’ confirmed a year ago…

Controversy over the self-employment loss compensation system has shifted to the 4th emergency disaster support fund. As it became difficult to pay compensation for losses before April of this year, when the re-and by-election was held, the ruling Democratic Party, the ruling party, turned to the fourth subsidy.

On the 27th, the Democratic Party held a general meeting of the lawmakers and concluded that retroactive application of the loss compensation system was’impossible’. “February legislation, payment at least in early April” (policy committee chairman Hong Ik-pyo on the 25th) overturned the previous position in two days. This is because the reality is that it is impossible to complete the extensive work of setting payment standards and targets, legalization, and financing by April.

Instead of the loss compensation system, the Democratic Party took out the 4th disaster subsidy’card’. Unlike the loss compensation system, which has to start from a blank paper, there is a precedent that the disaster support was paid three times. The ruling party, which was blocked while weighing the loss compensation system, eventually turned back to the easy way (disaster subsidies) they had been to.

Although it turned to the 4th subsidy, the controversy did not subside. From meeting application requirements, financing, and selecting the scope of payment. There are a lot of homework to be solved as well as the loss compensation.

There is no answer to funding the 4th subsidy except for an additional budget. The budget for this year has been scrapped to the bottom while paying the third subsidy. Out of a total of 7 trillion won in purpose reserves, which are the nature of emergency funds, 4,800 billion won has already been spent for the 3rd subsidy and 900 billion won for vaccine purchases. The remaining purpose reserve is only 1.3 trillion won. To pay the 4th subsidy, an additional budget (additional budget) must be established and almost all of the debt must be covered (issuance of deficit government bonds).

Inside and outside the ruling party, there is a claim that the 4th subsidy should be paid to the whole people as in the 1st period. This is because it is judged that the 3rd subsidy provided selectively is insufficient for the purpose of’raising approval ratings’ ahead of the re-and by-election of local governments in April. There is also a reason that the firepower of the first subsidy, which was universally provided to all the people, was confirmed in the parliamentary election last April.

The problem is finance. The first subsidy was distributed to the entire population of 400,000 to 1 million won per household. The money that went into this alone amounted to 1.43 trillion won. The 2nd and 3rd subsidies, which were selectively paid for victims of small business owners, special type workers (special high school), and freelancers, cost less than that of 7.800 billion won (second) and 9.3 trillion won (third), respectively. For universal payments, it is inevitable that it costs a lot of money as the recipients of the payment are all citizens.

Some of the ruling party even argue that about 15 to 20 trillion won is needed for the 4th subsidy. In addition to the general payment, it is a plan to add the content of selective payment as in the second and third periods.

The ruling party tried to adjust the speed to the practical limit, not the loss compensation system itself. As early as after legalization, the company plans to compensate 30%, 50%, and 70% of the loss based on operating profit in the first half of the year. For small business owners, such as simple taxpayers, whose annual sales are small and it is difficult to understand detailed profits and losses, a plan to compensate for policies is being discussed.

Democratic Party CEO Lee Nak-yeon also said in a meeting with reporters on the day that “waiting for the completion of the (loss compensation) system gives more time to suffer, so it is important to quickly support (4th disaster subsidy).” It is a structure in which loss compensation is added to the 4th support fund. The burden of debt is bound to increase.

The party and the government have already decided to increase the state debt for the 4th subsidy and compensation for losses. Prime Minister Jeong Sye-gyun said in a Thursday dialogue on the subject of the loss compensation system that “the country should increase the amount of debt a little bit more to prevent the household debt from growing.”

Narat debt has already reached the bottom of the chin. According to the ‘2021 government budget’ passed by the National Assembly in February last year, the national debt reached 956 trillion won at the end of this year. This year, national debt to GDP soared to 47.3%.

The increase in debt (compared to the original budget) from organizing four additional accounts last year and paying annual disaster support amounted to 41.7 trillion won. From the 4th subsidy to the compensation for losses, the debt may reach 1,000 trillion won this year at the current pace.

It took only three years to reach 1,000 trillion won in national debt, which was 66.2 trillion won at the end of 2017, which was the beginning of the Moon Jae-in administration. It is a big difference from the 8 years it took from 2009 (359 trillion won) to 2017 for the previous government debt to increase by 300 trillion won.

There are more obstacles surrounding the 4th disaster support fund. It is a matter of payment requirements. Previous 1st~3rd rounds of support were distributed in line with the 1st~3rd spread of Corona 19. The 3rd subsidy starts this month and ends at the end of next month. It is the promotion of the 4th subsidy too quickly in a situation where Corona 19 has not even spread for the 4th time.

Even President Moon Jae-in said, “It’s too early for the government to talk about the 4th disaster subsidies provided by the government at this stage, when execution of the budget for 2021 has just begun” (press conference on the 18th). However, President Moon said, “If the third disaster subsidy is insufficient, then we will have to go and discuss the fourth disaster subsidy.”

It is evaluated that the real reason is the fear of headwinds due to the loss of the retroactive application of the loss compensation system, and the’impaired increase’ ahead of the general election in April, after pursuing the 4th subsidy centered on the passport in the midst of not yet paying all the 3rd subsidy.

Jo Joon-mo, professor of economics at Sungkyunkwan University, said, “The ruling party announced that it would legislate and provide support for loss compensation and paid for the 4th disaster subsidy is a populist strategy conscious of the April general election.” The damage calculation and compensation standards must be carefully designed, but if money is poured in in a hurry in this way, the problem of financial leakage will become more serious.”

Sejong = Reporter Cho Hyun-sook [email protected]