Since the central government assumed the assets and debts of the provincial government after its downsizing, there have been disputes between the central government and former provincial governor James Soong's (
As the provincial government was part of the national government, its debt is owed by the national government. Therefore, central government officials should not say that the government's debt status has worsened only after it assumed responsibility for provincial government debts.
What the former provincial government needs to reexamine, or to defend itself over, is not how much debt it has left behind, but whether there has been any wasteful expenditure, complicity between government officials and business interests, political kickbacks or illegal disbursements.
Unless we have this kind of situation, or unless the former provincial government drained the normal profits of the banks through interest-free overdrafts, or unless it used the financial resources that should have been returned to the central government, the amount of debt left behind is not an issue. Inevitably, there have been rumors about such inappropriate expenditures. However, no central government agencies have come up with a concrete statement or an investigation. Nor has Soong's camp come up with any clarification. The public is left with the job of judging the subtleties in this issue.
Soong's camp tried to defend the provincial government's colossal debt on a number of occasions by saying that the provincial government also left a large cache of assets behind. This argument simply does not hold water. Most of the assets left by the provincial government are assets from the Japanese colonial era, or funds that had been allotted by the central government or accumulated over the years.
The increased value of the assets is the result of economic development over the years and the hard work of employees at government enterprises. They were not created by the operation of Soong's provincial government nor are they accounted for by spending that created the deficit. Therefore, attempts by Soong's camp to use these assets to explain the debt away does not stand to reason.
While claiming that part of the provincial debt is a leftover from previous governors, Soong's people seem to have forgotten that the same is true with the assets. They also seem to have forgotten about the overdraft and the fact that the lending banks have not been able to increase the value of their assets as a result. By presenting this argument, Soong's people seem to be indulging in nothing more than sophistry.
Chen Po-chih is a professor of economics at National Taiwan University.
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