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2008年12月16日 (火)



--The Asahi Shimbun, Dec. 13(IHT/Asahi: December 16,2008)

EDITORIAL: Can Aso maintain fiscal discipline?


Prime Minister Taro Aso on Friday announced a 23-trillion-yen economic stimulus package titled "emergency measures for protecting livelihoods." At the same time, he clearly stated the possibility of raising the consumption tax rate in three years and stressed his intent to achieve a balance between overcoming the financial crisis and maintaining fiscal discipline.


This double-pronged approach is a correct one. However, seeing how the prime minister has meandered on tax and fiscal policies, we are deeply concerned about whether he can really function as the command center for such an approach.


The basic economic and fiscal policy guidelines of 2006, which set forth the framework of the government's fiscal administration, stipulate the natural increase in the ever-growing social security spending should be curbed by 220 billion yen each year.


However, those actually working in welfare say this policy is tantamount to throwing away those in need of welfare. The prime minister himself had indicated his intention to review this policy.


To relax the curb on spending, it is necessary to find another source of revenue. That is why Aso set his sights on raising taxes on tobacco by about 60 yen a pack.


This caused a furor of resistance within the ruling coalition. Opponents argued that there were no guarantees the tax hike would increase revenue because the higher costs could further diminish an already declining demand for tobacco.


In addition, the higher taxes would affect tobacco plant farmers. The opponents argued they could not accept anything like that before a Lower House election.


Contrary to the prime minister's wishes, the ruling parties' tax system research commissions decided to postpone the idea of a higher tobacco tax. Now, there are no other options on the table for a new tax revenue source that can ease the pressure on tightening the social security budget.


More confusion erupted concerning the midterm program for tax reform, including an increase in the consumption tax rate to secure a stable revenue source for future social welfare programs.


The prime minister instructed Kaoru Yosano, state minister in charge of economic and fiscal policy, to clearly state in the midterm program that the consumption tax rate would increase "three years from now." But on the same day, the ruling coalition's tax panels decided not to include the timing of the tax increase in their tax reform outlines.


Vague wording was used instead because the Liberal Democratic Party's coalition partner, New Komeito, furiously resisted a specific schedule. There is no denying that lawmakers' knee-jerk reaction against mentioning tax hikes before an election came into play here.


During his news conference, Aso again referred to his intention to raise the consumption tax rate in three years and expressed an eagerness to persuade the ruling parties to go along with his plan. But it is highly doubtful Aso can win over the parties with his depleted support within the ruling coalition.


Given the situation, how far can Aso go in maintaining fiscal discipline during the process of compiling the budget plan for fiscal 2009 and the second supplementary budget bill?


Aso will certainly face increased pressure to use the maizokin surplus reserves in special accounts and issue more government bonds for social security costs. Once the threshold of self-restraint is crossed, all sorts of budget requests for pork-barrel programs for road construction and revitalizing local communities will burst forth.


The writing is already on the wall. Old-fashioned public works programs may well wriggle into the emergency stimulus package, which sets aside 1 trillion yen each in additional tax allocations to local governments and new funds reserved for economic emergencies.


Measures must be taken to prop up the economy and enhance employment security. But if those measures are used as an excuse for repeated pork-barreling with an eye on the next election, then it will be nothing more than an undisciplined, lax fiscal policy.


The public can never rest assured if politicians continue to carelessly increase this nation's fiscal deficit.



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