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2008年12月21日 (日)

09年度予算 埋蔵金と赤字国債が頼りとは

Budget cooked up with buried treasure, bonds

The Yomiuri Shimbun (Dec. 21, 2008)

09年度予算 埋蔵金と赤字国債が頼りとは(1221日付・読売社説)

Government spending must increase to prop up the economy and cover swelling social security costs, but tax revenues are forecast to drop substantially. In the teeth of the global financial crisis, the compilation of the fiscal 2009 budget was unusually difficult, given these two situations.


The general account budget for fiscal 2009 proposed Saturday by the Finance Ministry totals 88.5 trillion yen, up 5.5 trillion yen from the initial fiscal 2008 budget. The budget has ballooned to a record size as it sets aside 2.3 trillion yen to raise the government's contribution to the nation's basic pension program from the current one-third to half from April and 1 trillion yen in special emergency reserves to cope with any further deterioration of the economy.



By contrast, tax revenues in fiscal 2009 are estimated to fall to about 46 trillion yen, more than 7 trillion yen lower than the amount projected in the initial fiscal 2008 budget, due to a drop in corporate tax revenues resulting from worsening business performances. The fiscal 2008 tax revenues projection was revised downward by 7 trillion yen in the second supplementary budget, and the ministry's draft budget is based on the assumption that this declining trend will continue in fiscal 2009.



As a result, new government bond issuances in fiscal 2009 will climb to 33.3 trillion yen, up about 8 trillion yen from the initial fiscal 2008 budget, breaking the 30 trillion yen mark for the first time in four years. Funds raised by the bond issuances will account for nearly 40 percent of total revenues next fiscal year.


The government has set a goal of achieving a surplus in the primary balance of central and local governments in fiscal 2011. However, the expected sharp increase in the fiscal deficit has made it virtually impossible to attain this goal.


Given this, it is no longer necessary to stick to the goal. The targeted fiscal year should be postponed.


However, this does not mean that the massive fiscal deficit should be left unaddressed. It might be admissible to try to muddle through the present difficulties with new bond issuances, but the goal of tackling fiscal reconstruction by securing stable financial sources itself must not be abandoned.



Sales tax hike inevitable

It is, therefore, obvious that there is no choice but to rely on the consumption tax to stabilize the nation's finances. In light of the current faltering economy, now is not the time to raise the consumption tax. But discussions over doing just that should start now. An environment needs to be created to ensure that the tax can be hiked swiftly when the economy recovers.


Tax reform proposals for fiscal 2009 that were presented by the ruling coalition earlier this month did not mention when and by how much the consumption tax should be raised. The government and ruling parties should clarify the timing of the tax hike in the midterm program for tax reform that they will soon compile, if not earlier.



What is conspicuous in the series of budgets compiled recently is the tapping of surplus funds in special accounts, dubbed "buried treasure." For the second supplementary budget for the current fiscal year, which was approved by the Cabinet on Saturday, 4 trillion yen will be diverted from the reserves. In addition, more than 4 trillion yen from the reserves will be appropriated for the fiscal 2009 budget under the ministry's proposal. It appears the reserves will also be counted on for the fiscal 2010 budget.


The reserves will be used to fund the fixed-amount benefit plan, the centerpiece of the government's economic stimulus package, and to offset the increased financial burden the state will shoulder in fiscal 2009 and 2010 as a result of the government's contribution to the nation's basic pension program being raised. They also will be used to increase central government tax revenues allocated to local governments.


Most of the buried treasure is reserve funds and annual surpluses in the Fiscal Investment and Loan Program Special Account. The reserve funds are projected to total about 10 trillion yen as of the end of the current fiscal year. The surpluses arise from the differential between the high interest rate applied to loans extended by the government in the past and the current low interest rate on funds the government procures. The surpluses are expected to total about 2 trillion yen in the current fiscal year and nearly the same amount in the next fiscal year.


These funds are supposed to be used for funding the redemption of government bonds. Diverting it for other purposes is tantamount to issuing fresh deficit-covering bonds. This is permissible to a certain extent, but it should be stopped once the economy recovers.



Road tax plan undermined

The ministry's budget proposal has effectively hamstrung a plan to allocate road-related tax revenues for general purposes, a focal point in the fiscal 2009 budget compilation.


Under the proposal, 700 billion yen earmarked as a "temporary subsidy for regional road improvement" in the fiscal 2008 budget will be transformed into a "subsidy for creating the foundations for regional vitality," and the new subsidy, totaling 940 billion yen, will be distributed to local governments. About 80 percent of the amount will be used for road-related projects.


At the instruction of Prime Minister Taro Aso, central government tax revenues and other grants allocated to local governments were increased by nearly 1 trillion yen in total, to 16.6 trillion yen. At the local government level, there are still plentiful examples of wasteful expenditures that should be cut, such as the comparatively high salaries that public servants enjoy. Local governments must do more to rein in their spending.


In late July, the Cabinet approved budgetary request ceilings for the fiscal 2009 budget, in a bid to keep expenditures down.


For social security spending, the budgetary request guideline set, as in previous years, a goal of curbing the projected natural increase in related costs by 220 billion yen annually. To achieve this goal, a plan to hike the tobacco tax was broached but shelved. Eventually, the ministry's draft budget managed to make this policy add up by eking out necessary funds from the buried treasure.


However, the actual amount to be held down in the social security costs will only be about 20 billion yen in medical costs, achieved primarily by promoting low-priced generic drugs.



Problems have also emerged with other expenditure items. It is no longer logical to apply the ceiling system for budgetary requests. The government should consider using a new method for the fiscal 2010 budget compilation.



LDP idea worth studying

So what should be done? A set of proposals presented last year by the Liberal Democratic Party group studying fiscal reforms could be of some help. The group proposed that, first of all, the nation's budget be divided into two major categories: "social security" and "others."


Under the proposal, in the social security category, necessary increases to relieve concerns over people's livelihood are permissible, and revenues from the consumption tax, which will be transformed into a tax for social security purposes, will be used to secure financial sources for welfare in the future. Utmost efforts should be made to trim spending in the others category, according to the proposal.


In the others category, what is vital is a flexible approach--for example, allowing an increase in strategically important budgetary items, including official development assistance.


(From The Yomiuri Shimbun, Dec. 21, 2008)

200812210132  読売新聞)


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