Editorial: To each according to his needs

The central and local governments have been racking their brains over next year's budgets. The Executive Yuan has just cut the shares Taipei City and Kaohsiung City will get from the Tax Redistribution Fund (統籌分配款) in favor of the rest of Taiwan. The two special municipalities are crying foul, while other local governments complain the cut is not deep enough.

Local governments have come up with a wide variety of strategies to grab as big a slice of the pie as they can from the central government. As part of its protest over receiving a reduced share of the redistribution fund, the Taipei City Government has deleted the National Health Insurance subsidies and medicare subsidies for children between ages one and three from its budget. Taichung City Mayor Chang Wen-ying (張溫鷹) visited the Executive Yuan with a delegation of officials to demand subsidies. She won NT$500 million for her efforts. Hualien County followed suit the next day, sending a large group of local leaders to the Executive Yuan to appeal for money. County and city governments nationwide are scrambling to launch their own initiatives, for fear no crumbs will be left for those slow off the mark.

Local governments are poor, but so is the central government. True, the latter's revenues have increased by almost NT$100 billion compared to last year, but that increase is just enough for a pay raise for civil servants, teachers and military personnel, and for subsidies to cover losses in the National Health Insurance program. The massive reconstruction expenses for the 921 earthquake need a separate, special budget. To deal with its financial predicament, the Executive Yuan has cut down on unnecessary expenditures and construction budgets, while Vice Premier Chang Chun-hsiung (張俊雄) has suggested raising the public debt ceiling from 15 percent to 25 percent of the annual budget.

Raising debt limits and stabbing your neighbor in the back in order to grab more for yourself are not solutions to the problem. Even if this year's budget is passed, the problem will repeat itself next year. To get out of these financial straits, both the central and local governments need to adopt a long-term perspective.

First of all, they should recognize that everyone is in the same boat -- not having as much money as they would like. They must set priorities and strictly review their budgets in terms of efficiency. Next, they must throw away their voter-pleasing mentality of "increasing welfare but not taxes." There is no such thing as a free lunch. Every increase in welfare must be preceded by a financial evaluation. Don't write checks if you don't have the money. A large part of the current financial crunch can be tied to President Chen Shui-bian's (陳水扁) generous election promises. If the electorate really believe that a welfare policy is necessary, then they should be prepared for tax hikes to cover its costs.

Third, a balanced and fair allocation system must be worked out. How can the rest of the local governments be happy if Taichung City gets a slice just because it was quicker to complain? Chaos will result if the DPP-ruled areas get subsidies while KMT-controlled areas can only stamp their feet in anger.

Apart from more systematic allocation, the government should also more carefully review and evaluate the budget proposals submitted by local governments; it should also draw up priority standards for local governments. Finally, in order to encourage financial independence, the central government should adopt a system of allocating money in proportion to the amount of revenue the local governments raise themselves. This will force local governments to become more fiscally responsible and financially independent. It will also lead to the gradual phase out of the annual fight over the tax pie.