Yophy Huang discusses reform of public finance

Taipei Times: The DPP administration recently proposed again the NT$3,000 monthly subsidy for senior citizens aged 65 and over. Do you have any comments on the proposal?

Huang (黃耀輝): The DPP administration's public finance [policy] is leading the country in the wrong direction, as recent events in Argentina and Japan have shown. Argentina went bankrupt because of its generous social security system and [high] salaries for public servants, which caused government expenditures in recent years to skyrocket.

The Japanese government also borrowed heavily over the last few years and has allowed its budget deficit to exceed 7 percent of GDP [compared with the 3 percent benchmark set by the European Union]. Its fiscal and monetary policies have failed to improve the sluggish economy over the last decade -- and that despite 13 [different] economic recovery plans over the period.

Currently, the Taiwanese government is carrying over NT$2.3 trillion of debt, but the DPP administration still wants to spend NT$16 billion on a subsidy for senior citizens in order to keep a campaign promise.

The subsidy itself is unjustified because it excludes the poorest class from qualifying to receive the subsidy. (Anyone who is currently receiving a government subsidy for poverty is not qualified to receive the proposed NT$3,000 subsidy.) In order to bypass opposition from the KMT and PFP, the DPP administration will not try to enact a law for the new subsidy. Instead, it has included the subsidy in the annual government budget and is attempting to issue an executive order to work around the problem.

The DPP gimmick is actually destroying fiscal discipline, which could affect the country for decades to come.

In addition, the subsidy for senior citizens is actually crowding out social benefits for women and children. It's obvious that the DPP is trying to please its constituents [mainly senior citizens] in order to win future elections, since the voting rate of senior citizens is one the highest among all age groups. In another word, it's vote-buying.

TT: Will recent government reforms proposed by the DPP administration reduce government expenditures?

Huang: The DPP administration did say recently that it is planning to reform the government structure in order to reduce government expenditures.

However, based on past experience, it's unlikely that such reform will be successful. For example, several years ago former President Lee Teng-huei (李登輝) abolished the Taiwan Provincial Government. Nonetheless, expenditures have not been reduced. The Japanese government also spent years working on such reform without success.

The worst case scenario is that the general public will not trust the government anymore, [seeing] that the DPP administration has broken its promise again and again.

Before the DPP took over the administration last year, it said that by simply unifying government procurement procedures, it could cut government expenditures by NT$300 billion a year. But it failed to keep the promise. And now, the DPP administration claims that it is going to amend the Constitution again (the seventh time in the last decade). The general public will lose confidence if the pattern continues.

What the government should do is fire public servants when necessary. However, during the recent elections, President Chen Shui-bian (陳水扁) immediately did the opposite, assuring public servants that no salaries would be cut.