[Yeouido Interview] Woo Won-sik "People's Lives Hanging by a Thread... Supplementary Budget Formation Inevitable"

Woo Won-sik, Chairman of the National Assembly Budget and Accounts Special Committee
Emphasizes Government Fiscal Role Amid Economic Downturn
Calls for Review of Multiple Subcommittees in Budget Committee

"It is impossible not to have a supplementary budget."

Recently, at the National Assembly main building, Woo Won-shik, Chairman of the National Assembly Budget and Accounts Special Committee (affiliated with the Democratic Party of Korea), emphasized that the government must prepare a supplementary budget to address serious economic recession, high inflation, job shortages, and tax revenue deficits.

Chairman Woo had previously sent a letter urging the Budget Committee members to prepare a supplementary budget. The letter stressed that in difficult economic conditions such as soaring heating costs, the fiscal policy must devise measures to revitalize people's livelihoods. He expressed concern about the government's economic response stance. Chairman Woo said, "When the economy is in recession, the national budget must play a role," adding, "It is worrisome that the government is reducing the role of fiscal policy."

Woo, who was the ruling party floor leader when the Moon Jae-in administration took office, negotiated the budget with the opposition party. However, after the inauguration of the Yoon Suk-yeol administration, he took charge of budget review as the Budget Committee chairman from the opposition party. He proposed improvements to the National Assembly's budget review procedures and suggested that starting this year, multiple subcommittees should be established within the Budget Committee to conduct in-depth budget reviews.

Woo Won-sik, Member of the Democratic Party of Korea. Photo by Hyunmin Kim kimhyun81@

Below is a Q&A.

Q. You sent a letter urging the preparation of a supplementary budget. What is the background?

A. Since the beginning of this year, due to high inflation and sluggish exports, South Korea's economy has become very difficult. When the 2023 budget was submitted to the National Assembly last year, the economic growth forecast for South Korea was 2.5%. Even then, a recession was anticipated, but the government did not accept it, so the budget review proceeded under that framework. The National Assembly could only conduct reduction reviews. This year, the government predicted a growth rate of 1.7%, citing a severe recession. Since the economy has changed, a response is necessary. Inflation is also severe. Due to heating costs, people's lives are becoming difficult, but only 10% of households are eligible for support, and the government's support measures are very inadequate. Regarding jobs, last year employment increased by 800,000, but this year it is expected to drop to 100,000. A job drought is anticipated, but there is no budget for jobs this year, including public jobs. Moreover, due to indiscriminate tax cuts last year, revenue is projected to be 39.59 trillion won, 700 billion won less than initially expected. Even if only the currently planned projects proceed, there is a high possibility of tax revenue shortage.

Q. What is the government's response to the supplementary budget proposal?

A. The government's response is, in a word, silence. The Korean economy is in crisis, and people's lives are on the brink. At such times, fiscal policy plays an important role. When the economy is in recession, fiscal spending should increase, but the government remains silent despite clearly knowing the recession. Furthermore, real income is decreasing. It fell by 2.8% in the third quarter of last year and by 1.1% in the fourth quarter. Real income has decreased for two consecutive quarters, while inflation rose 5.2% at the end of January. Electricity, gas, and water prices increased by 28.3% compared to a year ago. In this situation, the government's silence is truly irresponsible. The country is in this state, yet the government's measures are only poor ones such as slaughtering cows to stabilize Hanwoo beef prices and banning briquettes to prevent suicides.

Q. The government emphasizes sound fiscal management. Should this stance change?

A. It is not right to rigidly cap national debt at a certain percentage and say it must never be exceeded. If the government ignores the people because of fiscal burdens, that is not the role of the state. In difficult times, the state should support through fiscal policy and replenish the treasury when conditions improve. Recent inflation is not due to increased fiscal spending but largely due to supply-side factors such as the Russia-Ukraine war. In this context, shifting to fiscal tightening is undesirable. Moreover, it is contradictory to advocate fiscal austerity on one hand and tax cuts on the other. Clearly, the government reflects the interests of large corporations, and the Ministry of Economy and Finance shows a trauma-like attitude toward national debt. Despite the economic situation, energy companies and banks have made huge profits. Resources should be secured from those who benefited, such as through windfall taxes. If that is still insufficient, issuing government bonds should be possible. The people must be saved.

Q. Budget negotiations went to the brink until the end of last year. What problems did you observe as Budget Committee chairman?

A. Our budget preparation starts in May at the government level and is finalized in September. During this period, the economic situation changes, but the budget does not. The National Assembly can only conduct reduction reviews, so one hand is tied behind the back during budget review. Moreover, when the administration changes as last year, negotiations become complicated. The budget is a policy written in numbers, so coordination is difficult, especially when the people running the country have different ideas. The opposition party, having lost the presidential election, tries to protect its policies, while the ruling party tries to insert its own policies, causing conflicts. Furthermore, with the National Assembly conducting audits, budget review only starts in November, giving just about a month for reviewing a budget of 640 trillion won. The Budget Committee is a special committee replaced annually, so expertise is lacking.

Woo Won-sik, Member of the Democratic Party of Korea. Photo by Hyunmin Kim kimhyun81@

Q. What measures are necessary?

A. To properly review the budget, the Budget Committee should be converted into a standing committee. Members should have a minimum two-year term and experts should be able to continue. Also, during the budget creation process?when the Ministry of Economy and Finance issues budget guidelines to government departments and when departments submit their budget requests to the Ministry?the National Assembly should be able to receive reports. The National Assembly and government should be able to consult on the budget. The government deals with the present, the judiciary interprets laws based on the present or past, but the National Assembly plans the future and predicts what comes next. Therefore, the National Assembly should be able to practically discuss how to prepare the budget. Speaker Kim Jin-pyo created a plan to report to the Budget Committee before the March resource allocation ministerial meeting and to report to the National Assembly throughout the government budget preparation process. This approach is necessary for proper budget review.

Q. Amending the National Assembly Act is necessary. Besides institutional improvements, are there operational improvements?

A. If the system does not change, multiple subcommittees within the Budget Committee could be considered. Currently, even if each standing committee submits review results, discussions in the budget subcommittee render them meaningless. Moreover, to review thousands of projects, roles need to be divided. As a subcommittee chairman, I participated in discussions concentrated over ten days, which made it difficult to proceed in depth. It is necessary to consider dividing the subcommittee to share roles.