Prime Minister Jeong Sye-gyun Supported by President Moon... 'Lonely Hong Nam-ki' Boomerangs Back at the Ruling Party

Consecutive 'Election Years', Ministry of Economy and Finance's Brake System Shaken... "Fiscal Policy Is Not an Endless Source" Deputy Prime Minister Hong Nam-ki's Cautionary Advice

[Asia Economy Reporter Ryu Jeong-min] "Fiscal resources are not an inexhaustible source, so we must always remember that fiscal conditions and funding circumstances are important policy variables to consider." The 'candid advice' posted on Facebook by Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is a point that the ruling party should carefully reconsider. This is because it is a variable that affects the 'balance of power' between politicians and the bureaucratic society.

President Moon Jae-in recently sent a political message supporting Prime Minister Chung Sye-kyun regarding the issue of the loss compensation system, which had emerged as a discord within the ruling party. On the 25th, the Ministry of Health and Welfare, the Ministry of Food and Drug Safety, and the Korea Disease Control and Prevention Agency's work reports drew more attention to the loss compensation system than to the solution for the 'novel coronavirus infection (COVID-19),' which was the main focus.

[Image source=Yonhap News]

President Moon instructed, "I hope that the Ministry of SMEs and Startups and other related ministries, as well as the ruling party and the government, will review institutionalizing loss compensation within a certain range that the fiscal budget can bear for small business owners and self-employed individuals whose businesses are prohibited or restricted due to government quarantine measures." Although he included the limiting condition of 'within the range that the fiscal budget can bear,' this effectively reinforced the necessity of the loss compensation system.

Prime Minister Chung Sye-kyun, who led the loss compensation issue, gained another 'brand' to showcase as a political achievement, and the Democratic Party of Korea, which aligned with the Prime Minister, secured a card to soothe public opinion ahead of the Lunar New Year holiday. From the perspective of local constituency lawmakers, resolving the economic difficulties of small business owners and self-employed individuals hit hard by COVID-19 was an urgent matter, and the loss compensation system could be a perfect measure.

What is noteworthy is that if the balance of power between politicians and the bureaucratic society tilts to one side, it could increase the political burden on the Blue House. It is a concern that the perception that Deputy Prime Minister Hong Nam-ki's candid advice was ignored due to pressure from the ruling party is spreading within the bureaucratic society, and it could also send a negative signal to public opinion.

[Image source=Yonhap News]

This is also related to the reality of consecutive 'election years' in 2021 and 2022. In April this year, the mayors of Seoul and Busan will be re-elected, and next March, the president will be elected, followed by metropolitan governors in June. The political circles preparing for elections cannot help but be tempted by policies that appeal to voters. The problem is that political promises exceeding the level that the national budget can bear may pour out.

As the risk of populist politics increases, the importance of entities that appropriately check and control it also grows. Within the government, the Ministry of Economy and Finance plays that role, but if Deputy Prime Minister Hong Nam-ki's influence weakens, it will be difficult for the check-and-balance mechanism to function properly. This is why it is difficult to view the loss compensation system controversy merely as a power game between the government and the ruling party.