Cash benefits pose more problems than they solve
Written by Writer on Wednesday, November 12th, 2008
Cash benefits pose more problems than they solve
The Yomiuri Shimbun
The Japanese people probably will not be able to simply rejoice at the prospect of receiving a flat-sum cash benefit from the state coffers, with all that fuss having been made settling on a plan that is still unsatisfactory to many.
The ruling parties have finally agreed on the outlines of a plan to distribute flat-sum cash benefits totalling 2 trillion yen. Details of the program remain extremely ambiguous. The government will not be able to escape criticism for devising this “irresponsible” policy.
The plan will inevitably bring confusion to the city, town and village governments that will be tasked with distributing cash benefits to residents.
The passing of a supplementary budget and the enactment of a related law are a prerequisite for implementing this program, but the government is certain to face an uphill battle when the Diet deliberates on these matters. As it stands now, it is not certain if the cash benefits will be distributed within this fiscal year as a “swift measure to boost the economy.”
At this juncture, we think the government and ruling parties should redesign the program–from scratch.
The government only decided on two points: the amount of the cash benefits–12,000 yen per person with an additional 8,000 yen for those aged 18 or younger and 65 or older–and the suggested lowest income ceiling of 18 million yen at which high-income earners will be urged to decline the cash benefits.
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Local govts left in lurch
Whether the income ceiling should be imposed and which period should be selected for calculating one’s income are essential points in distributing the cash benefits. However, the central government will leave these matters to each local government to decide.
Even if local governments want to set an income cap, they lack the means to check if the recipient’s annual income is below the income ceiling. Many cities, towns and villages likely will hand over the cash benefits as requested by residents. The income ceiling, therefore, will exist in name only.
We have serious doubts about the advisability of distributing money from the nation’s scarce financial resources in this way at a time when the country is struggling to address problems stemming from a lack of financial resources for tackling social security and other important policy matters.
The flat-sum cash benefit program has been adopted to replace a fix-amount tax cut proposed by the Cabinet of former Prime Minister Yasuo Fukuda at the strong urging of New Komeito.
The cash benefit program was drawn up because tax cuts, the government said, will not help low-income households that do not pay income taxes. Cash benefits, on the other hand, will be distributed to people regardless of their income and immediately stimulate the economy, the government reasoned.
But the imbroglio started weeks ago when some key members of the government and ruling parties asserted that high-income earners should be excluded from the cash benefit program.
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Aso’s responsibility
Prime Minister Taro Aso, who initially was unequivocal in stating that all households would receive cash benefits, changed tack after coming under strong pressure from the ruling camp and said the government would ask high-income earners to forgo the cash offer.
Even some members of the Aso Cabinet pointed out urging high-income earners to forgo cash benefits would not be systematic. In the end, the government and ruling parties settled on a half measure of entrusting local governments to handle high-income earners as they see fit.
It is easy to imagine how this came about. The government and ruling parties had apparently intended to propose such a program with great fanfare to woo voters ahead of the next House of Representatives election and work out the program’s details only after the poll. But their plan was scuttled when Aso decided to postpone the dissolution of the Diet, a step he insisted showed he had put priority on implementing key policies over fighting political battles with opposition parties.
Aso’s leadership as prime minister will be seriously scrutinized as his decision on the Diet dissolution resulted in such an unwise policy.
(From The Yomiuri Shimbun, Nov. 13, 2008)
