President Ma Ying-jeou (馬英九) announced on two separate occasions this past week that he was determined to implement pension and financial reforms which, if left undone, risks sending the government off a “fiscal cliff” in the not so distant future. Ma’s track record as a reformer is pretty abysmal. He has never managed to overhaul the Chinese Nationalist Party (KMT) or meet other reform pledges. Can the public really expect anything more from him this time?
The biggest obstacle to the much-needed reforms has long been the KMT itself. Its core constituency is made up of the same current and retired government service personnel (military, civil service, public school teachers) who benefit most from the system as it now stands. KMT lawmakers block reform proposals in committee or vote them down on the legislative floor, as they have done for more than a decade. KMT lawmakers even recently accused Ma of “pandering” to the opposition parties over the token efforts at pension insurance reform.
Ma met this week with the heads of the five branches of government –– Premier Sean Chen (陳冲), Legislative Speaker Wang Jin-pyng (王金平), Control Yuan President Wang Chien-shien, Examination Yuan President John Kuan (關中) and Judicial Yuan President Rai Hau-min (賴浩敏) –– to discuss the reform efforts. He has also met with KMT delegates, yet has proven less willing to hear voices from outside the government or the party. The Executive Yuan has scheduled more than 100 public hearings on fixing the problems with the government pension plans, but these are likely to be nothing more than a placebo aimed at placating public discontent.
Much of this fall’s political discourse has been dominated by the controversy over year-end bonuses given to government service retirees. Chen’s proposal in October to cut the number of retired government-service workers eligible for the year-end bonus from 445,000 to 10,000 (a figure later revised by the Directorate-General of Personnel Administration to 42,000) would make significant savings in the original budget of NT$20.2 billion (US$694.1 million) for the bonuses, but he hedged his bets by saying it might be just a one-time cut. That was still too much for KMT legislators.
This uproar over bonuses has obscured a key element of the pension program for government workers that is much more costly to the government: The 18 percent guaranteed interest rate on preferential savings plans, which has been in place for almost 30 years. The government pays the difference between the 18 percent rate offered to its retirees and the average rate offered by banks on time deposits. Since the average time deposit rate has been just above 1 percent for years, the government is losing about NT$70 billion annually to prop up the special savings rate.
In January last year, Ma talked tough about revising the guaranteed interest rate program, issuing a directive to the Executive Yuan to help make the program fairer. As KMT chairman, he also instructed the KMT to ask party legislators to push through the necessary legal amendments. However, his ire was only directed at reforms to the program made by the previous Democratic Progressive Party administration, which he said favored “top-level” government officials.
“Our goal is to make policy meet public expectations for fairness and justice, and we will amend the law and revise regulations to reach this goal,” Ma said at the time, adding that public perceptions would be taken into consideration when revising the policy.