Sunday, September 28, 2008

Memo on DPJ’s New Election Manifest; Also, More Scrambling by LDP-New Komeito

I’d mentioned briefly that the DPJ was exploring the need for sequencing its multitrillion-yen election-manifest upgrade package. The DPJ had been working on an update for the 2007 election manifest for the last three weeks with exactly that in mind. Given all the fanfare around the LDP makeover and the most recent flap leading to the MLIT Minister Nakayama’s resignation, the media attention had not been giving much space to this process. But in recent days, the basic framework has emerged (25 September Asahi; Yomiuri, 27 September)). Asahi reports that party leaders have already agreed on the main features of the program scheduled to officially debut next month.

The manifest will be a four-year program, neatly fitting into the four-year Lower House term of office, and will be implemented in one-, two-, and four-year stages. According to the Yomiuri report, the main items to be implemented in the first year are: establishing a monthly 26,000 yen allowance per child (5.6 trillion per year), making highways toll-free (1.5 trillion yen), abolishing the gasoline tax surcharge (2.6 trillion), and reforming the medical care system (2 trillion; abolishing the late-term elderly medical care insurance system etc,). The second year will see income subsidies for individual farmers (1 trillion). A fully tax-funded public pension system—Prime Minister Aso himself has talked favorably about this idea—(5.8 trillion) is to be implemented in the fourth year. The program, costing 22 trillion in its final year—around 21 trillion according to Yukio Hatoyama today, but what’s a trillion more or less?—will be funded by savings of 12.6 trillion yen from downsizing national public works programs, savings on public procurement, 20% reduction of human resources costs for public servants (retirement pus pay cut?), and reducing subsidies to state-owned entities; 3 trillion from sales of state assets and elimination of business income tax benefits; 2.7 trillion from reducing personal income tax deductions; and 4 trillion yen from special account surpluses (the most fungible of the “buried treasures”, the Yomiuri report mentioned only the Foreign Exchange Special Account, but this figure appears to include the Fiscal Investment and Loans Program Special Account surplus as well). The figures in the Yomiuri report do not add up and the DPJ leadership have yet to grasp the full implications of the details—Mr. Hatoyama did not have a ready answer when Kazuo Kitagawa, the brainy no.2 man for the New Komeito, pointed out a major hole in the child allowance/income tax deduction exchange scheme—so I’ll leave the numbers at that for the time being. I hope to have more to say when the full program emerges.

An interesting development on the LDP-New Komeito side is that under the new Prime Minister and the prevailing economic circumstances, half-baked talk has broken loose about vastly expanding the 1.8/11.7 trillion stimulus package. True, it’s about short-term measures, but it does make their accusations against the DPJ of fiscal irresponsibility less convincing to public ears. The scrambling over Health, Welfare and Labor Minister Yoichi Masuzoe’s expressed intent to “fundamentally review the Late-term Elderly Medical Care Insurance System” and seconded by Mr. Aso—if I’m not mistaken, the ruling coalition has been frantically trying to scale back expectations—also has the feel of an administration calling audibles and not doing a very good job of it. Add to that Mr. Aso’s previously expressed sympathy for a fully tax-funded basic pension system, albeit shelved for the time being until the LDP can resume talk about a consumption tax hike—and it’s like having a new coach with a different offensive system coming in the day before the championship game.

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