Governmental Theft

In his remarks at the press conference to officially announce the consumption tax hike on Tuesday, Prime Minister, Shinzo Abe, emphasized his determination on use of the additional income brought by that tax reform for nothing except rebuilding social security system. It was not strange at all for him to have said that, because the law for that tax reform unequivocally says so. Meanwhile, Abe was going to deliver economic stimulus policy with a large amount of fiscal spending. It is a sort of theft for a government to take advantage of the tax money for a different purpose from what it once promised.

Abe reiterated that the economic stimulus would be compatible with fiscal reconstruction, trying to persuade the people that new additional tax would work for improving fiscal structure. “I will secure stable fiscal resource to maintain and reinforce social security system by consumption tax. The income of the tax will be used for nothing but social security,” told Abe in the conference. He looked like obeying the requirement of the law.

Let us see the balance. The expected additional income of that tax hike is ¥8.1 trillions a year. The spending for the policy package of economic stimulus will be ¥5 trillions. One can understand the dishonesty of his words, because even though the government collects tax money for social security, five out of eight of that will be spent for building infrastructure, tax reduction for corporation or relief for house purchasers. The budget for social security, mainly for maintaining pension system, medical treatment and nursing care insurance, will still be in short of sufficiency, even if the consumption tax rate is raised up from 5% to 8%.

Approving the design drawn by former administration of Democratic Party of Japan, Liberal Democratic Party led by Abe supported the bill for the consumption tax hike last year. Then PM, Yoshihiko Noda, appealed to the public that consumption tax was the most appropriate and stable fiscal resource for maintaining social security system for the future, in which few young agers would have to support many old people. The fact is Abe has shifted its purpose from welfare to economy, eroding budget for social security.

As shown in the middle of the great disaster, the Japanese are silently waiting for help of government with surprising perseverance. On the other hand, they may show enthusiasm on dancing for created music, or bubble economy. If the Japanese want to secure the future of their kids, it is obvious for them to reserve resource for that. However, the leader of them does not like to deal with long-term issue, which political effect is not clear. His policy, therefore, is shortsighted, focusing on the victory in the elections three years for now.