Wed, Dec 24, 2014 - Page 8 News List

New leaders face fiscal challenge

By Lin Chia-Cheng 林嘉誠

At a meeting of the Democratic Progressive Party’s (DPP) local government leaders on Saturday last week, Greater Tainan Mayor William Lai (賴清德) expressed concern about how everyone would go about implementing their election promises given that the central government is out of money.

He told the new leaders that they should not issue debt during their first term just because they are eager for achievements, and that local governments must focus on fiscal policy. Despite Lai’s warning, the DPP’s 13 county commissioners and mayors signed a declaration to join forces to obtain funds from the central government.

The problem is that the central government lacks resources and can hardly fend for itself, much less help local governments. In this struggle over power and money, newly elected local leaders are eager to achieve progress, and political parties are engaged in competition with each other. It is all about national development and public welfare, and this makes it absolutely necessary to pay attention to fiscal records.

Fiscal revenue differs at the central and local government level, and by now people are used to hearing about governments overstretching budgets and failing to balance income with expenditures. The final defense for the fiscal record is to cut expenses at every level.

The public needs to understand that there is no such thing as a free lunch, and that, although businesses will sometimes pick up the tab, any check issued by the government would in the end have to be paid for by taxpayers.

The central government has gradually managed to gain control over expenditure in recent years, and there are a few outstanding examples of local governments that have managed to increase debt payments and decrease overall debt.

Greater Kaohsiung and Taipei are big debtors, although the capital has abundant fiscal resources. Every year, the city collects and pays substantial business taxes to the central government, so fiscal revenue should not be a problem.

Greater Kaohsiung has passively announced that its debt, which stands at more than NT$220 billion (US$6.931 billion), remains within the limits set by the Public Debt Act (公共債務法), but it should take a more active approach to giving residents information about its fiscal plans.

New Taipei City has issued debt in the form of Treasury bills, and fiscal authorities are allocating capital from the city treasury every day. Running a city government is similar to running a business, and “entrepreneurial government” has long been an administrative model.

Counties with fiscal problems on the east coast and on outlying islands lack the guarantees of the special municipalities, so they have to engage in a free-for-all over the remaining resources, and they should therefore take more active measures.

The DPP should be praised for initiating regional cooperation and setting up a coordination team and a joint governance think tank. All that is left to do is to wait and see how the party will go about its business.

While the public was skeptical about the new premier, the expectation of new policies from the new leaders is normal. They cannot rely on spokespeople to repeat old cliches: the pie will not get bigger, and zero-based budgeting should be used to allocate the government budget, while the central government’s tax revenue allotments should be reviewed.

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