Ensure fiscal health

It is reckless to pour money into bottomless pit

President Moon Jaein's call for an aggressive fiscal policy has raised concerns about the country's fiscal health. Moon must be well aware that the government should not print money recklessly to boost the economy at the sacrifice of fiscal soundness.

Everyone knows that a too expansionary fiscal policy will do more harm than good. That's why the government should be careful in increasing spending in order not to waste taxpayers' money and inflict damage on the country's fiscal status.

This, of course, is not to say that the Moon administration should not pursue an expansionary fiscal policy at all. If needed, the government should not hesitate to ramp up its spending to stimulate the economy or cope with any contingencies.

Fiscal policy can be an effective tool along with monetary policy in dealing with macroeconomic issues. Particularly when there are limited monetary options, policymakers need to zero in on fiscal measures to produce intended results.

Considering the difficult economic conditions, it is necessary to employ an expansionary fiscal policy. In March, the International Monetary Fund recommended that the government draft a large supplementary budget ― as much as 0.5 percent of GDP ― if it wants to achieve its economic growth target of between 2.6 percent and 2.7 percent.

Thus, the Moon administration presented an extra budget bill worth 6.7 trillion won ($5.8 billion) to speed up economic recovery, help wildfire-hit residents in Gangwon Province, and reduce fine dust emissions. The bill is, however, languishing at the National Assembly due to the political deadlock between the ruling and opposition parties.

The passage of the budget bill is urgent. Its timing is very important if the execution of extra spending is to be effective. President Moon has called for the rival parties to go beyond partisanship and approve the bill.

Yet it is hard to understand why Moon was trying to imply that all the economic problems can be solved through fiscal means. He stressed the need for an active fiscal policy to tackle a set of "structural" problems such as the widening income gap, high unemployment, the aging population and low birthrate.

We do not believe those structural issues can be solved through the injection of taxpayers' money only. Instead, they require a plethora of well-prepared socioeconomic measures. Pouring money into a bottomless pit will only make matters worse.

The liberal government already came up with a super budget of 470.5 trillion won for this year. Next year's budget is likely to surpass 500 trillion. Government debt is expected to rise to 781.7 trillion won in 2020 from this year's 731.8 trillion won. The sum is forecast to account for 40 percent of GDP next year. However, it would be better to keep this under 40 percent to ensure fiscal soundness.

Policymakers should pay more attention to a recommendation by the state-funded Korea Development Institute that an expansionary fiscal policy should be a short-term, not long-term, tool. No one can overemphasize the importance of a balanced budget and fiscal stability.