In the face of surging public borrowing and hidden liabilities, academics yesterday urged the Chinese Nationalist Party (KMT) and the Democratic Progressive Party (DPP) to skip the rhetoric and lay out their vision for a sound fiscal policy ahead of the January elections.
Based on the latest government data, the national debt is expected to hit a record high of NT$5.137 trillion (US$177.1 billion) at the end of next year, or 37.3 percent of the past three years’ average GNP — close to the 40 percent public debt ceiling stipulated in the Public Debt Act (公共債務法).
The nation’s estimated total debt would rise to more than NT$21 trillion, if the more than NT$700 billion in non-profit fund borrowing, more than NT$600 billion in local government debt and NT$15 trillion in hidden debt were taken into account.
Chen Jinji (陳錦稷), a research fellow at Taiwan Brain Trust think tank, told a press conference yesterday that Taiwan would face the same fiscal problems as the US down the road, and would have to raise its debt ceiling to address its deficit problem.
The budget shortfall has expanded exponentially every year since President Ma Ying-jeou (馬英九) assumed office, with his administration borrowing at a rate of NT$400 billion a year, bringing the newly added debt since May 2008 to NT$1.339 trillion, he said.
The ever-worsening budget deficit was mainly caused by unconscionable government spending, indiscreet tax cuts, limited allocation of budget for debt amortization and a serious addiction to debt, he added.
“What concerns us most about the nation’s fiscal imbalance was that it would lead to a dysfunctional government,” as evidenced by the government citing budget constraints as reasons to reject or delay addressing problems such as the wealth gap, the urban-rural divide, low welfare subsidies for elderly farmers, disabled and jobless people, and providing affordable public housing, Chen said.
The think tank yesterday also released its fiscal policy platform, in which it said that the nation’s fiscal objective should not be “balancing the budget,” but rather ensuring that the government can “sustainably carry out its functions,” “make the most effective use of the nation’s resources” and “implement social and distributive justice.”
Earlier this week, DPP Chairperson Tsai Ing-wen (蔡英文) pledged to cut the nation’s deficit by half within four years and to balance revenue and expenditure within eight years if she is elected president next year and the DPP wins a majority in the legislature.
National Taipei University finance professor Huang Shih-hsin (黃世鑫), who was also at the press conference, said it was pointless to focus on deficit reduction.
What should be emphasized in a party’s fiscal policy platform is whether the country’s revenue is being spent well on promoting benefits for the good of the nation and its people, instead of on consolidating the party’s power, Huang said.
As an example, Huang said laws that granted special tax breaks as incentives for investment — a development model adopted by the country in the 1960s to boost industrialization — served mainly to benefit the then-KMT administration as it sought to bolster its legitimacy.