In response to the economic recession induced by the financial crisis, the Cabinet has tried to find ways to reduce the impact on Taiwan’s economy. Last Tuesday, Premier Liu Chao-shiuan (劉兆玄) invited the Council for Economic Planning and Development and other financial agencies to discuss the matter. That afternoon, Liu announced the government’s consumer voucher plan. The vouchers, valued at NT$3,600 each, will be issued to every Taiwanese citizen, regardless of age, and the total budget is NT$82.9 billion (US$2.5 billion). The government will use a special budget and hopes the vouchers will be distributed before Chinese New Year. This is the first positive move by the government in combating the tough economic situation.
The Cabinet’s decision can be evaluated in terms of the decision-making process and the policy content. From a process perspective, most countries have decided to battle the global recession by using both monetary and fiscal policies to increase overall demand. Policies common around the world include lowering interest rates and increasing expenditure. The Chinese government promoted a huge stimulus plan worth 4 trillion yuan (US$586 billion).
Renowned institutions overseas have predicted that Taiwan’s GDP growth may fall below 2 percent next year. This made the government realize that it must be more proactive to keep economic growth above 2 percent and this is why officials decided to issue the consumer vouchers.
The policy met with more approval than opposition, although there is much debate as to whether it should exclude the wealthy and if it should apply to households or individuals.
Whether or not the wealthy should receive vouchers has caused the most controversy because this involves issues of fairness and equality and because more and more people are becoming increasingly aware of the allocation of wealth and other resources in today’s “M-shaped society.”]
In view of the government’s decision-making process over the past six months, there were worries that this positive policy might turn into meaningless talk and lose its original focus. Luckily, Liu was able to deal promptly with differences of opinion and come up with a complete package. It was Liu’s attitude and actions that saw this policy approved so smoothly and quickly.
It is inevitable that there will be people for and against any public policy. However, worthwhile policies should not be postponed just because some people disagree with them. The longer such policies are postponed, the unhappier the public will become. In addition, a final decision should be announced as soon as it is made and we should not have to wait for approval at the Cabinet meeting.
From a policy content perspective, two changes were made in terms of the target groups. Originally, the vouchers were going to be issued to households, but the government then decided to give them to each individual citizen. The second change was that the wealthy would not be excluded from receiving the vouchers. Allocating the vouchers to individuals is the easiest and fairest method because with households as the unit, unfair situations would arise because household sizes differ. While each household has an average of 3.01 people, this is not a concrete figure. In the past few days, household registration offices have received many visits from people who have separated their household registrations, one of the consequence of using households as the unit.
The main reasoning behind the decision to allocate the vouchers to households was to exclude the wealthy from the scheme, since to do so, the combined income of the entire household must be considered. If excluding the wealthy is not a concern, the vouchers can be allocated to each individual citizen and technical problems and administrative issues can be greatly reduced. This decision was correct, as extraordinary measures taken in extraordinary times are best aimed at achieving a single goal. The price of not doing so could be huge administrative costs and the creation of situations that are difficult to decide.
Since the consumer voucher scheme is aimed at stimulating consumption, there is no need to get caught up in the issue of whether the vouchers are allocated fairly or not. Liu said wealthy people can donate their vouchers to public interest groups. This would represent a voluntary re-allocation of resources, which would help bring about harmony and encourage mutual respect between the advantaged and the disadvantaged. This is much better than trying to solve such problems via a standardized system.
Of course, the consumer vouchers are not the only way to revive the economy, nor is this enough to combat the economic recession. At most, the consumer vouchers will merely help lessen the economic losses people are currently experiencing. It has already been predicted that this special budget will only be able to stimulate a mere 0.64 percentage points for next year’s economic growth. If we want to keep economic growth above 2 percent next year, much more hard work and strong policies will be needed.
I propose that those with home mortgages who pay their mortgages on time be allowed to ask banks for an extension of the payment terms for either the interest or the principal based on their individual financial situation and needs. This would leave them with more funds and minimize bad debt while also increasing their buying power.
The government could give more thought to this and come up with more innovative ideas. An even more fundamental solution would be for the government to prioritize expenditure on productive and constructive public infrastructure projects in next year’s budget. This would address both short and long-term policy goals.
It is often difficult to come up with perfect extraordinary measures in extraordinary times. However, the more proactive the government, the more public confidence can be rebuilt. If consumer confidence returns, maybe the economy will bounce back quicker than we can imagine. Therefore, the speed at which the decision to issue consumer vouchers was made and the way the policy was simplified is praiseworthy. I hope the government will continue its efforts.
Chou Tein-chen is a lecturer in the Department of Accounting Information at Hsing Wu College.
TRANSLATED BY DREW CAMERON
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