Guessing the names of rocks lying on the road has recently become a popular pastime -- is it Tang Fei (
Ever since President Chen Shui-bian (
Is it really such a stumbling block? Western industrial democracies have argued over the question for half a century and they still disagree. Nevertheless, social welfare policies have been implemented and economic development continued as usual. However, when an economy begins to slow down -- whether due to an oil crisis, industrial transformation or globalization -- social welfare always gets blamed, because it is the concern of middle- and lower-class people, who have never controlled knowledge nor the media and have seldom ruled a country.
There were painful reasons for Chen's remarks about deferring social welfare policies: First, the stock market had continued to tumble; second, only after coming to power did the new government find out its predecessor had left the nation's finances in an extremely bad shape; third, the new government is finding it very difficult to implement its election platform.
Taiwan's stock market fluctuations have nothing to do with social welfare; a majority of them have nothing to do with the economy either. The development of social welfare, which began several decades ago in Taiwan, has never been a burden to the stock market. Instead, we have seen the market rise from its initial level of 2,000 to 12,000 a few years ago -- and then fall back to between 7,000 and 8,000. In addition, the government's financial predicament was not exactly caused by social welfare.
Sure, social welfare spending has risen -- up from 12.8 percent in 1980 to 19.4 percent in 1990 -- then falling slightly back to 18.8 percent for next year. But to say that such spending, which accounts for only 2.8 percent of GNP, has become a major burden is an exaggeration. Including possible social welfare spending by local governments, the government's entire social welfare budget still accounts for just 3.3 percent of the GNP. Adding in the education budget still puts Taiwan's social welfare spending at less than half the average 20-plus percent of GNP of OECD countries.
It is increasingly obvious that the financial problems are caused by insufficient revenues. The tax burden has fallen from 18.6 percent 10 years ago to the 13.4 percent set for next year. The ratio continues to fall because of various tax breaks implemented to encourage investment and boost industrial development. The unified tax (兩稅合一) mechanism adopted in 1998 also drastically reduced taxation. By cutting revenues, the state reduces the money available for public services. Therefore, blaming the increased social welfare spending seems to be a distortion of the truth.
Now, if we look at the government budget for 2001 -- which has been rejected by the Legislative Yuan -- social welfare accounts for NT$302.2 billion or 18.8 percent of the central government budget -- an increase of NT$53.5 billion over this year. Included in the increase is NT$18.1 billion for social insurance premium expenses. Subsidies to make up for losses incurred by the government employees' and farmers' insurance programs amount to NT$37.2 billion and NT$14.3 billion respectively. All told, the insurance programs have taken NT$63.7 billion.
In other words, the increase in next year's social welfare spending is largely to pay debts owed by the structurally deficient insurance programs for government employees and farmers. The only two social welfare items actually added to the budget are NT$1.7 billion to cover free medical coverage for children under the age of three and NT$900 million for children's education vouchers. The rest is mostly readjustments for population growth. Calling such a budget an increasingly heavy burden certainly appears to be barking up the wrong tree.
Social insurance makes up the bulk of social welfare spending in all developed countries. Taiwan is no exception, with two thirds going to social insurance. It is only normal for the government to pay for part of the social insurance spending (whether sharing premium payments or subsidies for insurance payouts). Our problem lies in the unhealthy premium structures of the government employees' and farmers' insurance programs, which will continue to incur massive losses. Unless we readjust these premiums, we will have to keep paying for the losses.
We also have two items that take up a whopping two thirds of the NT$82 billion welfare service spending: subsidies for elderly farmers, and medicare, livelihood and educational subsidies for retired servicemen. This is the main reason behind the lop-sided distribution of social welfare resources. How could it be the fault of the new government if its predecessor had created these bad precedents?
Imagine the pain of the disadvantaged who are being blamed for being a hindrence to economic development when in fact they are not getting much more in benefits than before. The government should take the initiative to revise the unhealthy social insurance and welfare subsidy structures instead of constantly blaming social welfare for its woes -- which makes it not much different from its predecessor.
Morris Chang
The government should listen to Chang and learn how to view the mutually benefitting interaction between social welfare and the economy.
Lin Wan-i is chairman of the Taiwanese Association of Social Workers.
Translated by Francis Huang
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