Quick work, lacks vision to end debt woes

by and

Analysts had mixed opinions for the 2010 annual budget plan the Cabinet approved Friday, saying the Democratic Party of Japan-led government worked quick but failed to show how it will alleviate the nations’ mounting debts.

“The budget plan (catered to) the DPJ’s campaign pledges, with a view to next year’s Upper House election,” said Tomoaki Iwai, a political science professor at Nihon University.

But he added that ¥92 trillion “is too big,” given the sharply falling tax revenues and the size of this year’s ¥88 trillion initial budget plan.

“The DPJ could have been more flexible with its (election) pledges under the economic downturn,” Iwai said, warning the bloated budget could trigger a future financial debacle.

The ¥92 trillion fiscal 2010 budget plan sticks to Prime Minister Yukio Hatoyama’s pledge to allocate government resources “from concrete to the people,” which he says means the government will shift from construction projects to welfare expenses and allocations to improve the lives of the people.

For the DPJ, which took over the government from the long-ruling Liberal Democratic Party in September, crafting the budget plan was the first step in demonstrating it would live up to its “manifesto” pledges for the August election it won by a landslide. But in reality, Hatoyama was forced to renege on key promises, including his vow to end a provisional gas tax, due to lack of finances.

Nihon University’s Iwai said the government’s decision to backpedal is acceptable.

For example, the full launch of toll-free expressways never really a big issue with voters and its postponement won’t be taken as a broken pledge, he figured. To further expand the budget just to keep a promise will do more (financial) harm than good at this point, he added.

“The (pledges) in the (August election platform) need to be realized within four years. Certain flexibility should not be frowned upon,” Iwai said, noting instead that the problem is how the government finalized the budget plan.

Critics earlier this month said Hatoyama was under the thumb of DPJ Secretary General Ichiro Ozawa, who requested that the government backpedal on ending the gas tax surcharge and offering child-care allowances without including a household income cap to qualify. The government chose to renege on its promise to eliminate the gas tax days after Ozawa piped in, fueling speculation that he is effectively the “shadow shogun” running the show.

“The true issue here is not that Ozawa has huge power — it is that Mr. Hatoyama can’t make decisions on his own,” Iwai said of the relationship between the party and the government, saying this double-structured power arrangement needs to be changed to avoid public criticism.

The DPJ managed to wrap up the budget process within the year as promised despite speculation it would miss the target. Hatoyama now faces a confrontation with the opposition camp, mainly the LDP, come January’s ordinary Diet session.

The prime minister must remain focused on his budget goals since any flip-flop during deliberations will not go unobserved by both voters and the opposition parties. He will also be pressed to come up with a midterm budget plan that covers the government’s finances for the next few years.

Critics say the fact that the DPJ will tap into cash reserves accumulated in special government accounts shows Hatoyama lacks a long-term vision for reviving the economy because such reserve funds can be used only one time.

“There will be occasions when Hatoyama will be asked to offer a vision for a longer term, since the budget-making process will continue beyond this year. He will need to have one when the time comes,” Iwai said.

Meanwhile some critics praised the DPJ for managing to end old practices.

On cutting wasteful spending, the DPJ created the Government Revitalization Unit’s spending review process, which trimmed ¥680 billion from the initial budget requests by ministries. Broadcast live on the Internet, teams led by DPJ lawmakers grilled bureaucrats and demanded they reduce spending and return funds to government coffers.

When expense cuts went too far and received criticism, including outcries from Nobel Prize laureates urging that the budget allocations for scientific research and education not be axed, Hatoyama quickly caved in.

“The process of screening became visible to the public, and it was no longer a discussion between bureaucrats and lawmakers with vested interests,” claimed Satoru Matsubara, a professor of economics at Toyo University. Although the amount saved through the screening is a fraction of the initial target, he added that the process gained favor because the reviews by the teams were not final and at times adjusted by the Cabinet.

“This practice should be carried into the future,” Matsubara said.

Another budget-making process that received attention was the relationship between the Finance Ministry and the government. The DPJ touted its goal of stripping bureaucrats from the process, but critics said Hatoyama was still too dependent on the ministry.

“In reality, it is difficult for the government to strip away all of the Finance Ministry’s authority over the process,” Matsubara said, while praising Hatoyama for putting as much power as possible in the hands of politicians.

Matsubara noted budget plans routinely took over six months to formulate under LDP administrations, and it was a “surprise” the DPJ managed to do it in half the time.

This concentrated process should be carried out through next year and beyond since it can better incorporate changes in the economy, he said.