To Eliminate Debt, First Eliminate Populism

To Eliminate Debt, First Eliminate Populism
China Times editorial (Taipei, Taiwan, ROC)
A Translation
August 18, 2011

Summary: In response to repeated public exhortations, DPP presidential candidate Tsai Ing-wen has finally unveiled the first plank in her "Platform for the Coming Decade." In the section on taxes, Tsai Ing-wen has promised that if she is elected president, and the DPP wins an absolute majority in the legislature, the DPP will reduce the deficit by half in four years, and balance the budget in eight years. Tsai Ing-wen has boldly proposed fiscal reform. For this she deserves praise. But what specifically has she proposed? Can her proposal negotiate Taiwan's populist political gauntlet, particularly the DPP's? It will be interesting to see.

Full Text below:

In response to repeated public exhortations, DPP presidential candidate Tsai Ing-wen has finally unveiled the first plank in her "Platform for the Coming Decade." In the section on taxes, Tsai Ing-wen has promised that if she is elected president, and the DPP wins an absolute majority in the legislature, the DPP will reduce the deficit by half in four years, and balance the budget in eight years. Tsai Ing-wen has boldly proposed fiscal reform. For this she deserves praise. But what specifically has she proposed? Can her proposal negotiate Taiwan's populist political gauntlet, particularly the DPP's? It will be interesting to see.

Recent opinion polls show Tsai Ing-wen's momentum fading. Even if James Soong runs for president, and the Blue Camp falls prey to internal divisions, Tsai Ing-wen's momentum will be insufficient. If anything, she risks marginalization. Party insiders are extraordinarily anxious. They fear Tsai Ing-wen has no idea how to run a campaign. Many people have even suggested that Tsai Ing-wen learn at the feet of Chen Shui-bian. They have urged her to adopt Ah-Bian's "divide and conquer," Blue vs. Green campaign methods. So far, Tsai Ing-wen has resisted the temptation. She has kept the election focused on public policy, For Taiwan's election climate, this can be considered a small step forward.

Political candidates have a responsibility to maintain a constructive election climate. Tsai Ing-wen has finally set forth a substantive policy proposal. Now it must undergo public scrutiny.

Compared to the United States and Europe, the Republic of China is not on the verge of a financial crisis. If we go strictly by the book, the national debt has yet to exceed the statutory limit of 40% of gross domestic product. Some financial and economic experts fear that if the 13 trillion NT in hidden debt is included, the Republic of China's national debt will reach astronomical proportions. Even more worrisome than the huge national debt is the Republic of China's 11.9% tax rate, This is lower even than Singapore's, famous for its low tax rate. The annual budget deficit is now 240 billion NT. Such a financial arrangement is unsustainable in the long term.

During its eight years in power, the Democratic Progressive Party increased the national debt by one trillion two hundred billion NT. Since the KMT returned to power three years ago, the national debt has increased nearly one trillion three hundred billion NT. The increase in the national debt accelerated. The 8/8 Floods and the financial tsunami reduced government revenue and increased government expenditures. The government's frequent tax cuts have worsened the debt crisis. The problem is that whenever the issue of tax cuts comes up, both the ruling and opposition parties, which usually fight each other tooth and nail, immediately sing the exact same tune. For example, the government's proposal that the sales tax be raised was put on indefinite hold. But the ruling and opposition parties both jumped on the business tax cuts bandwagon. They outbid each other, and abruptly cut the business tax rate from 25% to 17%.

During an interview last week, Premier Wu Den-yih lamented that the Republic of China's tax rate is far too low. But at the same time the public wants everything other nations have to offer. They want social welfare as comprehensive as those in Scandinavia. The government can only do its best. Premier Wu understands the fiscal structure issues, but cannot carry out fiscal reforms. The ruling party is clearly not above reproach.

Tsai Ing-wen has proposed balancing the budget. Her promises must be subject to the same scrutiny. With this plank in its campaign platform, the DPP has vowed to reduce the budget deficit, But it failed to specify how. What precisely does it intend to do? Does it intend to increase taxes? Or does it intend to reduce expenditures? The DPP's Platform for the Coming Decade has done nothing but proclaim a goal. It has said nothing about how to achieve it.

Fiscal policy proposals cannot be discussed in isolation. They must be discussed alongside government spending. The social welfare plank in the Platform for the Coming Decade will be announced on Friday. Based on past remarks by Tsai Ing-wen, one of the DPP's highest priorities is the establishment of an extensive social welfare system. But the DPP has never had the guts to call for a tax increase. Therefore what is all this talk about defict reduction, except hot air?

In fact, the DPP Central Standing Committee has just adopted a resolution. it has decided to increase subsidies to elderly farmers 1000 dollars, It has increased the subsidy from 6000 NT per month to 7000 NT per month. This will increase the burden on the state treasury by 8.4 billion NT. Throughout the process, the DPP has never explained where it would obtain the funds. It has never considered reintegrating the subsidies for elderly farmers into the national pension system. Its proposal is pure populism, utterly bereft of fiscal discipline.

Neither the KMT nor the DPP have any qualms about issuing rubber checks to cover subsidies for elderly farmers. Tseng Chen-wei, a fiscal affairs expert says, "When it comes to taxation and fiscal affairs, there is no distinction between the ruling and opposition parties." This is the sad truth about populist politics on Taiwan. The ruling and opposition parties understand the problem. But they have no desire to work together to solve the problem. Just the opposite. Extreme political polarization has encouraged both the ruling and opposition parties to outbid each other, to buy off voters for short term electoral advantage. In the long term of course, we will all have to pay the price.

In fact, behind Tsai Ing-wen's proposal for a balance budget, lies the concept of intergenerational equity. Birth rates are declining. The heavy burden of debt accumulated by this generation will be borne by the next generation. Is the DPP sincere about the concept of intergenerational equity? If it is, why wait until a DPP candidate is elected president and DPP legislators constitute an absolute majority in the legislature? Shouldn't the DPP practice what it preaches, here and now?

改掉民粹 才能解決巨額國債問題
2011-08-18 中國時報

各界千呼萬喚，民進黨總統參選人蔡英文終於推出「十年政綱」第一道菜，在財稅篇中，蔡英文承諾，只要總統勝選、國會過半，民進黨將在四年內達成赤字減半、八年達到財政平衡的目標。蔡英文勇於提出改革財政的主張，值得肯定；但是具體做法為何？能否扺擋台灣政治、尤其是民進黨的民粹傾向，都相當值得觀察。

近來蔡英文民調、聲勢下挫，即使宋楚瑜出馬、藍營內鬨，都無法拉抬蔡英文氣勢，反而出現邊緣化危機；黨內異常焦慮，擔心蔡英文不懂選舉，甚至有不少人建議蔡英文向陳水扁取經，採取扁式割裂藍綠的選舉作風。目前，蔡英文尚能抗拒這種誘惑，讓選舉停留在公共政策的討論；就台灣的選舉文化而言，可說是進了一小步。

當然，維持良好的選舉文化，是政治人物的基本道德，蔡英文終於推出實質政見，就必須接受各界的詳細檢視。

和美國、歐洲相比，台灣現階段並未面臨迫在眉睫的財政危機；就帳面上來看，國債尚未超過法定的國內生產毛額百分之四十上限。有財政學者憂心，如果加上十三兆的隱藏性債務，台灣國債可能已達天文數；不過，比巨額國債更令人擔憂的是，台灣租稅負擔率只有百分之十一點九，比低稅率的新加坡還要低，每年的預算赤字就高達二千五百億，長期來看，這樣的財政結構不可能支撐。

事實上，民進黨八年執政增加一兆二千億國債，國民黨重返執政三年來，也已增加近一兆三千億，國債加速度增加，除了八八風災、金融風暴導致政府稅收減少、支出增加外，政府頻頻減稅，更讓債務危機雪上加霜。問題是，只要談到減稅，一向鬥得你死我活的朝野政黨，馬上就有志一同；例如，政府原先調升營業稅的主張遲遲沒下文，但針對調降營所稅，朝野卻大方送禮，競相加碼，從百分之二十五，一下子就降到百分之十七。

行政院長吳敦義上周接受專訪時感嘆，台灣的稅賦負擔偏低，但每樣事都想要國際最好的，社福水準想和北歐一樣，政府只能盡量努力；由此可見，吳揆並非不了解財政結構困境，但就是無法貫徹財政改革，執政黨確有可議之處。

在這樣的背景下，蔡英文提出財政平衡的政見，同樣要接受言行是否一致的考驗。在這份政見中，民進黨雖矢言降低財政赤字，卻並未提出具體做法；究竟要增加哪些稅收、減少哪些支出，民進黨的十年政綱除了宣言式的目標外，並未具體說明項目。

事實上，財政政見絕對不可能獨立，必須和政府支出一起討論；十年政綱中的社福篇，將於周五公布，依蔡英文過去的言論，民進黨執政後仍以建構社福體系為優先目標。但民進黨一樣不敢喊加稅，如此一來，要談降低赤字，豈非緣木求魚？

事實上，民進黨中常會日前才通過決議，決定調高老農津貼一千元，從每月六千元增為七千元，國庫為此又將增加八十四億。在整個過程中，民進黨未交代財源，不考慮老農津貼回歸國民年金體制，形同只有民粹主張，完全不見財政紀律。

持平而言，有關老農津貼加碼等濫開支票做法，國民黨和民進黨一樣毫不手軟；就如同財政學者曾巨威所說，「在租稅和財政問題，我們沒有在野黨和執政黨的分別」。這是台灣民粹政治的可悲，朝野政黨並非不了解問題所在，但卻不願合作解決問題，反而因為極端對立的政治氣氛，讓朝野政黨競相加碼籠絡選民，短期也許有選舉利益，但長期大家都會受害。

事實上，蔡英文財政平衡的主張背後，有著世代公平的理念；因為這一代累積的債務，在少子化的趨勢下，下一代將背負更沉重的包袱。民進黨若要真誠的實踐世代公平的理念，不用等到「當選總統、國會過半」，現在就必須提出言行一致的政見主張。