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Monday, Nov. 17, 2008
Cash handout finding few fans
Local leaders say the economy needs a government stimulus plan with greater focus
In 1999, the coalition government was bashed for what was dubbed "one of the silliest policy measures of the century."
Is the current government ready to repeat that blunder as early as this year or early next year?
The answer is probably yes, according to numerous governors and mayors across the country as well as most commentators.
Criticism for a planned ¥2 trillion cash handout program, formally decided by the government led by the ruling Liberal Democratic Party and New Komeito on Wednesday, hasn't ceased over the weekend, reviving the memory of the 1999 coupon program that cost ¥700 billion but had little benefit for the economy.
Kanagawa Gov. Shigefumi Matsuzawa, appearing on a TV news program Saturday, waved a ¥10,000 bill before the camera and argued that the government should not be scattering cash around among people with no strategic economic focus.
"The previous coupon handout program boosted the individual consumption portion of gross domestic product by only 0.1 percent. The Economic Planing Agency admitted that it had little economic effect," Matsuzawa pointed out.
Dozens of governors and mayors similarly have called on the government to spend that amount of money, if ever it will, with a clear strategic focus.
"(The government ) will spend ¥2 trillion, which is equal to the budget of the Tottori Prefectural Government for five years. I cannot even visualize that amount of money," Tottori Gov. Shinji Hirai said Thursday.
Under the program announced by Prime Minister Taro Aso, the government plans to distribute ¥12,000 to every citizen, plus an additional ¥8,000 for each child 18 or younger and elderly person 65 or older. Whether foreigners will be covered has not been decided yet.
The handouts are supposed to total ¥2 trillion, nearly three times as much as the notorious coupon program.
Analysts say the handouts are as unlikely as the 1999 coupons to spark a consumption boom, because people probably won't spend much amid the global financial crisis and a looming rise in the unpopular consumption tax, which Aso said may be increased in three years.
Even government economists agree. Kaoru Yosano, economic and fiscal policy minister, revealed at a news conference Oct. 31. that the Cabinet Office estimated that doling out ¥2 trillion in cash will boost total GDP by only 0.1 percent.
What particularly astounded local government leaders was Aso's decision to let municipalities decide whether to put an income cap on applicants so people making a lot of money would not be eligible.
Mayors worry about chaos at their municipal offices as thousands of people are expected to rush to apply for the handout in a short period of time, and local officials would have a giant task checking the annual income levels of applicants.
Norihisa Satake, mayor of Akita and head of the national association of mayors, argued that it's simply impossible for city offices to handle all the clerical work.
"If 137,000 households (in Akita) come to City Hall over two weeks, about 10,000 people will come a day," said Satake, adding the building only has parking for 400 automobiles.
The central government reportedly hopes to start handing out the cash after having a second supplementary budget enacted by the Diet in March.
But March is also the time when workers at municipal offices are extremely busy as the fiscal year ends later in the month.
"Even if we stop all the (other) work, we would not be able to handle (the applications). Do Diet members understand the reality of this?" Satake asked at a news conference in Akita last week, according to minutes of the conference posted on the city's Web site.