What would the prime minister Junichiro Koizumi's structural reforms be evaluated by the historians of the next generation? Koizumi Reforms have ever been paid a significant attention to and had many things to talk about among almost all the people throughout the country.
The main purpose of these reforms is said to make a "small government" by privatizing the public organizations like Japan postal service, which does regulate less likely the private market economy and leave well enough alone.
As the U.S. president Ronald Reagan once said that the government is not the solution to the problem but the problem, it seemed the old-fashioned "laissez-faire" governmental management policy, which had been believed to be the best policy in the late 19 century in the capitalist countries like then the Great Britain and the United States and leaves things to take their own course without interfering. This Reagan's way of pursuing a small government soon became known as the "Reaganomics".
Koizumi's way of state governance has been reputed as the copy of Reaganomics in terms of a heavy weight on the freely organized market economy. Some naive questions would be asked about the policies Koizumi gets to proceed; Do the reforms make us a happy and wealthy life? Do they hurt us? To what extent if they hurt us ?
Today's Japan Times' column has a good summary about the Koizumi Reforms and the difficulties Koizumi has to tackle;
(Monday, June 12, 2006)
A tenable vision of efficiency
By KEIZO NABESHIMA
Prime Minister Junichiro Koizumi's structural reforms for creating a "simple, efficient government" have entered the final phase.
...According to estimates by the Cabinet's advisory council, 20 trillion yen is required to eliminate revenue shortfalls. The new council has agreed that more than half of the revenue shortfalls should be covered by cuts in expenditures. However, the government and the ruling coalition have yet to agree on specific measures for cutting expenditures by as much as 10 trillion yen.
...Within the LDP, though, talks on budget-cut measures are encountering difficulty. The focal issue is how much to trim social-security expenditures, which amount to 20 trillion yen or a quarter of the government budget.
Reductions in social-security expenditures would lead to increases in personal expenditures for medical and nursing care. Furthermore, the proposal to cut public works investment by 3 percent annually over five years would hurt local economies dependent on such investment.
Proposed cuts in tax revenues allocated to local governments would lead to wider financial divides among them.
...Since it will be impossible to cover revenue shortfalls only with expenditure cuts, debate on tax hikes, especially a raise in the consumption tax, is unavoidable.
...Tax reform for averting a fiscal crisis as the population ages and birthrates fall is crucial. Former Chief Cabinet Secretary Yasuo Fukuda, ...asserted last month that a raise in the consumption tax was the only viable option for balancing the budget (and that) a 5 percent hike in the consumption tax would produce 12 trillion yen in extra revenue a year.
The comment was an apparent challenge to (now Chief Cabinet Secretary Shinzo) Abe, who argues that drastic cuts in expenditures should first be implemented in line with Koizumi's reform plans. As the top spokesman for the Koizumi government, Abe is not in a position to push for a higher consumption tax. Fukuda has no such restrictions.
...The administrative reform promotion law sets goals to be achieved in five to 10 years in various fields. The goals include a 5 percent cut in the number of central government bureaucrats by 2010, the consolidation and privatization of government-backed financial institutions, and the halving of the number of special accounts (now 31) in the government budget -- which are in addition to the general-account budget -- to produce 20 trillion yen in surplus revenue for restoring fiscal health.
...Last year, the nation's birthrate fell to an all-time low of 1.25 children per woman, and the population saw its first year-on-year decline. The government predicts the population will fall below 100 million in 2051. The proportion of people aged 65 and over, which exceeded 20 percent for the first time last year, is expected to top 35 percent by 2050.
...Koizumi's reform agenda for creating "a simple, efficient government" merits praise as a policy goal. But it will be meaningless unless it engenders a socioeconomic system for comfortable living with less anxiety, based on a cost-benefit analysis.
Koizumi Reforms come to an end to a drastic cut in government expenditures. Here is a critical statement that the poor fatherless families and elder pensioners will be neglected under the policies Koizumi seeks. Some commentators, who are usually thought to be the conservative LDP members, call them the "Cut-off-Poor" policy, which means the policy not to take care of the poor.
A smaller government, with tax rate lower, leads to a smaller expenditure and thus a lower level of welfare services. It is happy for the workers in the companies, who are always taxpayers, to pay a lower tax, whereas it is not pleasant for the children or elder people, who are supported through the public education or pension system, to take the inadequate public services.
To the contrary, a larger government requires a heavier burden with its social security service adequate. The people enjoying the benefits of public welfare systems would be happier than the payers for the benefits, the employees or executives.
I would like not to ask you which is given a higher priority to, the taxpayers or welfare receivers, but to ask what the government does for the whole citizens. Should the government do much for us? Or less for us? To what extent should the government do for our everyday life?
Now the modern capitalist society has many difficulties and challenges necessary for us to takle. More people are getting older and becoming the retirees and pensioners, less people working and paying tax. Could less working people help more elder people with their remaining lives? If the government took care of them, both a hike in tax rate and a broader tax burden would be required. It is not a sustainable way for the government to supply enough social security services to support their lives without tax rate increasing.
We have to think of the new style of governing Japan for the next generation. Cutting the expenditures and increasing the taxes would be necessary for us to build a sustainable path to the next society. Koizumi's way of reforming the structural systems to support the present welfare state is not wrong. The government should encourage the private companies to do what they can do and revise the public services organized by the inefficient governmental enterprises.
We should look more up on the efficiently organized market economy. Free market leads to efficient allocation of resources as textbook says. And at the same time we should reconize the necessary role of the government to fix the failures and disorders of the market economy. In terms of reorganizing the results of the markets, the role of the government is not small but limited to solve the problems.
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