The system is blocking financial rehabilitation.

W hile the Diet bogs itself down in debate over the 82-trillion yen in general account spending earmarked for the upcoming fiscal year, a larger specter is being left unattended-that of the 207-trillion yen in special-account expenditures.

Reconstructing deficit-ridden government finances requires a major overhaul of the bloated special accounts, a hotbed of hidden debt and wasteful expenditures. But both the government and the ruling as well as opposition parties have shown surprising lethargy in tackling this problem.

As finance minister in 2003, Masajuro Shiokawa sounded the alarm about special-account expenditures, saying, ``While people in the main building are fending off hunger with rice porridge, children in the outbuilding are feasting on sukiyaki.'' Translation: Deep cuts in the general-account budget would not restore fiscal health if extravagances financed by special accounts continued.

Special accounts are established to provide funds from specific revenue sources for explicit programs and projects. Despite consolidation in recent years, 31 such special-purpose funding accounts still exist. One example is the road improvement special account for road construction, which is funded from gasoline and other road traffic-related taxes. Another is the special account to promote energy-saving projects with receipts from oil and coal levies.

Special accounts are created because the public generally will only support proposals for new taxes if it knows the money is to be used for a specific purpose.

Clearly, the system of special accounts poses a major obstacle to fiscal reform.

Funds that have accumulated in the road improvement special account cannot be used for anything else than building or repairing roads. Meantime, taxe revenue siphoned from gasoline prices continue to grow. This has created a situation where the government inevitably continues building new roads even if they are not needed-with the result that funds continue flowing into related public corporations.

Alarmed by the situation, the Finance Ministry's Fiscal System Council urged the government last autumn to undertake a review of a third of all the special accounts, including the national forest service and road improvement accounts.

But such partial adjustments will not significantly dent the government's profligate spending under this cozy arrangement.

Since many of the special accounts provide financial support to the vested interests of bureaucrats and politicians, any attempt to reform the system is bound to meet fierce resistance. But a dose of new thinking could make things a lot easier.

Developing the nation's road network progressively reduces the need to build new roads. So the relationship between the burden and the benefit changes over time. That requires the government to adopt the principle that all special accounts shrink gradually year after year.

One approach to building such a phase-out mechanism would be a mandatory transfer of a certain portion of the earmarked revenue into the general account. Such tax-financed special accounts should in principle be phased out in about 10 years through yearly hikes in the ratio of the transfer.

If a certain account is to be kept unchanged, a law should be enacted to postpone the cut in the account by just one year at a time, and bureaucrats and special-interest politicians would be required to present a strong enough case to the Diet for maintaining the account.

Bureaucrats tend to protect their territories within the given framework.

Any attempt to whittle down or scrap individual special accounts usually provokes strong opposition, purely as a defensive reaction. But a radical and quick makeover of the entire system may encounter much less bureaucratic resistance. We wonder if Prime Minister Junichiro Koizumi know that?

--The Asahi Shimbun, Jan. 27(IHT/Asahi: January 28,2005)