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2008年11月 4日 (火)


(Mainichi Japan) November 3, 2008

Economic stimulus package throws money around to delay Diet dissolution

社説:追加経済対策 これは究極のばらまきだ

The government unveiled a new economic stimulus package on Thursday whose main objective is to hasten a recovery from an economic crisis that could require three years to cure completely. Prime Minister Taro Aso also declared that he would raise the consumption tax after the economy rebounds and submit the new stimulus package to the Diet before the end of the year. There is no doubt that package goes a lot further than any previous package. He has added vim to the economic measures while boasting that he will not be throwing money around.


But is this really true? Contrary to his rhetoric, this package is an extreme example of handing out cash.


Payments to households, tax breaks on home loans, and further reductions in highway tolls will swell the size of the total package to around 20 trillion yen, including fiscal spending of around 5 trillion yen.


At the end of August, the government and ruling coalition wove a fixed-sum tax cut into the emergency economic package. Why did they choose this moment to switch to a plan to make payments to all households totaling 2 trillion yen without establishing income ceilings? The package is touted as simple and quickly implementable, but these stated reasons were probably merely for public consumption.


Instead of a tax cut, which will be harder to associate with the ruling coalition, cash payments and the distribution of coupons are better ways to make citizens aware of their accomplishments. But such methods will inevitably be seen as ways to buy votes heading into the general election and the elections for the Tokyo Metropolitan Assembly.


If the government claims to have adopted a medium- to long-term perspective, it needs to consider drastic policies to promote consumption including measures to enhance the redistribution function of income and other taxes. The hike in the consumption tax could then be positioned as part of overall plan to promote consumption.


By including the largest ever tax break for home loans, it is apparent that the administration wants to demonstrate that it remains ardently committed to housing policy. However, the tax break for home loans has tended to vary at particular points in time, and consequently has given rise to unfairness. The proposed measures will exacerbate the sense of unfairness and inequality. The government needs to consider an approach that will not promote unfairness and also look out for those who have acquired their homes with their own assets.


There are also problems with the proposal to further lower highway tolls, which had already been reduced in the August stimulus package. During the interim, the price of oil fell to 60 dollars a barrel, and the window for adopting countermeasures to soaring oil prices may have passed, with the exception of support for those industries which are severely affected by price rises. If the government wishes to talk about injecting vim into the economy, it should have reconsidered this proposal.


The government and ruling coalition have said that they will implement this package without resorting to additional deficit-covering bonds. However, the main source of revenue for the package will be the reserves in the special account of the government loan and investment program, which are used to redeem national bonds. At a time when a huge drop in tax revenues is considered a certainty, it is inevitable that deficit-covering bonds will have to be issued to cover the shortfall.


In the interest of spurring growth, it may be permissible to allow fiscal conditions to temporarily deteriorate. However, at such times, the measures that are adopted need to make the people confident that the economy will recover. Measures whose results are not transparent will only contribute to a ballooning deficit.


In addition to the construction of a social insurance safety net that will make citizens feel secure, what Japan needs now are rejuvenated households and small- and medium-sized companies, which are the foundation of the economy. Politically motivated pandering to the masses and cash handouts will not strengthen our economic society.


Will this package resolve the political turmoil? Prime Minister Taro Aso appears committed to delaying the election for the House of Representatives, and has received approval from collation partner Komeito to do so. The government and ruling parties are considering moving up the submission of the second supplementary budget bill, which includes the new stimulus package, to the current Diet session, and have begun to talk about extending the term of the extraordinary Diet session beyond Nov. 30.

In order to quickly respond to the global financial crisis, the prime minister should immediately dissolve the Lower House so that an administration which has earned the confidence of the people can take the helm on economic policy.

If the second supplementary budget bill is deliberated during the current Diet session, it is expected that the friction between the ruling and opposition parties will heat up. The prime minister must not arbitrarily put off the dissolution of the Diet. At the same time, the opposition and ruling parties must make an effort to clarify their issues of contention through debate.

The prime minister again emphasized that "policy is more important than the political situation" at his press conference on Oct. 30. One can sense Aso's self-contentment that by stressing the importance of prioritizing economic policy he has managed to brush off talk of early dissolution, which had held sway even within his own camp.

But the new stimulus package, which is so obviously mindful of the looming election, raises suspicions that avoidance of a political vacuum might have been the real impetus behind it.

The Cabinet's sagging approval rating has contributed to the ruling coalition's apprehensions regarding the coming general election. By postponing the election, the ruling coalition is rapidly transforming policies that are supposed to address the financial crisis into election-oriented tactics.

Having postponed the verdict of the voters, the prime minister needs to clearly indicate what he intends to do during this Diet session. Otherwise, he will contradict his stated reason of giving priority to policy. He has a responsibility to at the bare minimum submit the second supplementary budget bill during the current Diet session so that it can be fully deliberated by the ruling and opposition parties.

On the other hand, the Democratic Party of Japan (DPJ) needs to reflect on the fact that by giving priority to the dissolution of the Diet it put policy debates on the back burner.

In particular, its decision to allow passage of the amendment to the new anti-terrorism special measures law after only two days of actual deliberation is incomprehensible. Delaying tactics are not acceptable, but the House of Councillors must fully debate the issues including the conditions on the ground in Afghanistan. We hope that the DPJ will, in its consultations with the ruling coalition to modify the amendment to the financial functions strengthening law, which will be used to inject capital into financial institutions, lead the way to a constructive conclusion.

Furthermore, it is important that the DPJ proposes economic measures that would constitute a pledge to the people. With the election looming, it is still not clear what the contested issues are between the ruling coalition and the DPJ. There is strong concern that the election for the House of Representatives could degenerate into a competition between the ruling and opposition parties to scatter unlimited amounts of cash. In the debates in the remaining days of the current Diet session, the DPJ will be put to a test to determine whether it is able to clarify its differences with the ruling coalition.

Some members of the ruling and opposition parties believe that the general election may be pushed back beyond next spring. However, with the fate of the second supplementary budget bill hanging in the balance, the prime minister will have to walk a tightrope in managing the government between the end of this Diet session and the convening of the ordinary Diet session early next year.

That is why there are limits to a policy of postponing dissolution of the Diet. The Aso administration is the third to be formed without seeking approval from the electorate, but earning the confidence of the people is indispensible to the implementation of the medium- and long-term policies that the prime minister talked about at his press conference. This is a point that needs to be emphasized once again.

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