If there’s one thing that’s been learned from the global financial meltdown, it is this: Despite all their learning, an overwhelming majority of economists were unable to see the mother of all modern economic disasters looming even when the structures and policies that were responsible for the problem were right before their very eyes.
The advice of economists and economic advisers trying to address the problem that they failed to detect might therefore warrant close examination — more so if they are attached to a government suffering terribly in the polls.
So it is in Taiwan, where the Chinese Nationalist Party (KMT) administration is resorting to the risky — if not dubious — tactic of dishing out NT$3,600 in cash in coupon form to every citizen young and old (but not foreign taxpayers, notably enough).
The idea is to provide every Taiwanese national with an identical, once-only windfall that will encourage spending and give the economy a boost. A tax cut — which would have been means tested and would not have required a loan — was ruled out because of concern that recipients would defer to the gloomy financial environment and save the money instead.
The problem with this is that any creative soul is more than capable of saving the money by using the handout only for daily essentials until it runs out.
Still, it is likely that many people will buy that electrical appliance, that family holiday or that Lunar New Year gift that had been just beyond their reach.
Therein lies the objectionable nature of this policy. The money may provide a temporary boost to retailers and service providers, but the message is that in a time of looming hardship and severe threat to export income, we should use taxpayer money to encourage Taiwanese to spend on things that they neither need nor, in many cases, can afford.
KMT legislators think that this represents an intelligent approach to reforming economic structures that must adapt to new global challenges. KMT Legislator and legislative Finance Committee member Lai Shyh-bao (賴士葆) on Monday said: “People will be forced to consume, which will bring positive results.”
Forced consumption? This was an exaggeration, though the very thought of “forced consumption” is offensive enough to those who encourage intelligent management of money and who support a free market in which regulation serves the long-term fiscal interest, not short-term political expediency.
Discouraging people from saving at a time of economic instability is thoroughly objectionable and probably counter-productive. And the boost to the economy would be so marginal and the cost of introducing and maintaining a new bureaucratic structure so wasteful that we can only shake our heads in disbelief at the wide support this measure is receiving from advisers and “experts” on the sidelines.
The handout requires the rewriting of two laws, which is to say that it will break those laws if the legislature does not act soon. The rationale for the existing regulations is unlikely to have been heeded by the government, which is legislating on the run.
The KMT marketed Vice President Vincent Siew (蕭萬長) as an economic wunderkind when he and President Ma Ying-jeou (馬英九) ran for office. With Taiwan facing a serious global and domestic economic challenge, how ironic it is that tough times should feature yesterday’s men sprouting confused policies.
The other irony is that the KMT legislative caucus recently denied the Democratic Progressive Party caucus a tax cut, saying that there wasn’t enough money. Now it is saying that there is enough money — in the form of mounting debt for our children — and all this during a global financial earthquake.
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