|Photo taken on March 19, 2020 shows U.S. dollar banknotes in Washington D.C., the United States. The Trump administration's plan to send Americans relief money as part of a massive stimulus package in response to COVID-19 could be $1,000 per person. Xinhua-Yonhap|
By Do Je-hae
The prolonged COVID-19 pandemic is prompting many countries to come up with drastic measures to combat the economic fallout. One of the most urgent tasks for governments is to make sure that struggling workers and families are able to make ends meet during these tough times. For this, more countries are starting to experiment with the idea of providing direct financial assistance to their citizens during the coronavirus outbreak.
The concept is quickly gaining steam in Korea, where many people say that COVID-19 has resulted in one of the worst economic crises since the late 1990s. The world's 12th-largest economy is reeling from the fallout from the pandemic, prompting President Moon Jae-in to hold a series of economy-related meetings in recent weeks to seek measures to cushion the blow from what he called an "unparalleled situation."
It is expected that the government will draw up another extra budget, in addition to the 11.7 trillion won ($9.44 billion) approved by the Cabinet on March 18 after it was passed by the National Assembly the previous day. The ruling Democratic Party of Korea (DPK) has repeatedly indicated that stronger measures are necessary, including programs like ensuring citizens have a basic income during the COVID-19 outbreak. In this context, the possible inclusion of cash handouts in the secondary extra budget is gaining attention.
Rising cases of cash payouts
The U.S. administration announced a proposal to give about $1,000 to individual Americans at a press conference at the White House on March 17. "We're looking at sending checks to Americans immediately," Treasury Secretary Steven Mnuchin said. The direct payments are part of U.S. President Donald Trump's sweeping stimulus package potentially worth around $1 trillion, which also includes tax cuts, relief for industries undergoing particular stress, such as airlines, and assistance to small businesses.
The concept of giving emergency cash funds is also being talked about in Japan, with major media outlets such as the Mainichi newspaper reporting on March 18 that the Shinzo Abe administration could offer cash handouts similar to a move to provide 12,000 yen ($112) in 2009 to assist people's living expenses during the global financial crisis following the collapse of Lehman Brothers.
Against this background, the DPK is strongly pushing for the cash relief as a way to respond to the public concerns over maintaining their livelihoods. The government has already implemented strong steps to provide quick financial assistance to regions and people affected by the pandemic. In an unprecedented move, the government designated Daegu and parts of North Gyeongsang Province as special disaster zones on March 15 to provide quick monetary and administrative assistance to deal with COVID-19.
It is the first time for the nation to designate a certain region for this kind of assistance for a crisis unrelated to a natural disaster. But the DPK insists that this is not enough.
During the party's decision-making supreme council meeting on March 18, Rep. Park Ju-min underlined the cash handout scheme being championed by leading economists, including Gregory Mankiw, professor of economics at Harvard University and chair of the Council of Economic Advisers during the George W. Bush administration.
"Fiscal policymakers should focus not on aggregate demand but on social insurance. Financial planners tell people to keep six months of living expenses in an emergency fund. Sadly, many people do not. Considering the difficulty of identifying the truly needy and the problems inherent in trying to do so, sending every American a $1,000 check ASAP would be a good start," the professor wrote in his latest blog post. "There are times to worry about the growing government debt. This is not one of them. Helping people over their current economic difficulties may keep more people at home, reducing the spread of the virus."
Giving cash to temporarily support struggling households has quickly been catching on at some local governments such as the city government of Jeonju, North Jeolla Province, and the provincial government of Gangwon Province. They recently announced that they will pay around 500,000 won to people who are more vulnerable to the economic fallout from the virus, such as the unemployed, small business owners and irregular workers. The Seoul Metropolitan Government will also provide emergency relief funds of up to 500,000 won for low-income earners.
Some local government chiefs, such as the Gyeonggi Province Governor Lee Jae-myung and South Gyeongsang Province Governor Kim Kyoung-soo, have even proposed to the National Assembly and government a universal basic income program for all citizens.
Amid reduced incomes following the pandemic, the Korean public is becoming increasingly approving of the proposed cash payouts called "basic disaster income." In a Realmeter survey published on March 16, 48. 6 percent of respondents said they supported the introduction of a basic disaster income system, while 34.3 percent were against it.
|President Moon Jae-in visits the Seoul City Hall on March 16. Yonhap|
But the government is being careful about reviewing the system due to concerns over fiscal soundness and criticisms that is just a populist tactic taken ahead of the April 15 general election.
Some experts are cautioning against the implementation of a basic disaster income before sufficiently reviewing its actual effect on economic recovery. There is also the question of sustainability, as this may not be the last time Korea is faced with a situation like COVID-19.
"Disaster caused by an infectious disease like COVID-19 is likely to deal a huge blow to a certain region or affect the daily lives of the public for a prolonged period of time. Therefore, it is necessary to meticulously consider a system that guarantees a minimum income. But this must be preceded by close research on the actual impact of the basic disaster income on economic recovery," Bae Jae-hyun, a researcher with the National Assembly Research Service, said in recent report.
"The government needs to be clear and transparent about how to acquire the funds. The question of basic disaster income does not apply only to the current COVID-19 situation. The government also needs to worry about the sustainability of such a policy, which can be requested again in similar disaster situations in the future."
During a press briefing earlier this month, the presidential office said that it was not considering a direct monetary assistance program as proposed by some local government chiefs and election candidates. "However, we take a serious view of reality and the situation that has led to such proposals," a presidential aide said on March 9.
But more recently, President Moon showed a seemingly more open stance toward the proposal during a meeting with Seoul Mayor Park Won-soon, Gyeonggi Province Governor Lee and Incheon Mayor Park Nam-chun on March 16.
"President Moon did not come to a conclusion on various types of support measures that include basic income concepts. Instead, the meeting has left open the possibility for future consultations on the issue between the central and local governments," said presidential spokesperson Kang Min-seok in a statement after the meeting.