[Reporter’s Notebook] Is the Democratic Party Not Afraid of the Supplementary Budget Request?

Supplementary Budget Proposal Lacking Funding Plan
Discussion Needed on Inflation and Fiscal Burden

Political Desk Reporter Dongwoo Lee

"About 35 trillion won is judged to have no impact on inflation."

On the 13th, Heo Young, head of the Democratic Party's Livelihood Economy Recovery Task Force, said this to reporters right after proposing an additional supplementary budget (supplementary budget) of about 35 trillion won. The Democratic Party proposed a supplementary budget with increased expenditures of 24 trillion won and 11 trillion won for livelihood recovery and economic growth, respectively. This also included the budget for the nationwide 250,000 won local currency payment, known as the ‘Lee Jae-myung budget.’

The Democratic Party repeatedly emphasized that 35 trillion won is the ‘minimum’ supplementary budget amount. Jin Sung-jun, chairman of the Policy Committee, explained, "I think about 50 trillion won should be supplemented to defend against the downward pressure on economic growth rate, but we proposed it by suppressing it as much as possible." They cited domestic demand recovery and economic stimulus as the justification for the supplementary budget. It is not wrong to say that during the past COVID-19 period, the supplementary budget promoted consumption and investment, preventing the bankruptcy of small business owners.

However, there is something peculiar in the Democratic Party’s supplementary budget proposal. Although there is already a detailed plan on how to use the 35 trillion won, that is, where the money will be spent, there is no mention of how to secure the funding. When asked about the funding plan, the Democratic Party only then mentioned considering expenditure restructuring, securing surplus funds from various special accounts and funds, and issuing government bonds.

In summary, they suggest using unused funds from the government’s budget, such as large-scale social overhead capital (SOC) funds that were allocated but not used, or reallocating budgets from other areas through restructuring, and if that is insufficient, considering government bond issuance. The use of the government’s unused funds is a highly contentious topic. The government’s unused budget is due to a ‘tax revenue shortfall’ amounting to 87 trillion won over the past two years. Because of the budget shortage, non-essential projects have been postponed by tightening the belt, resulting in unused assets. About 20 trillion won was saved in the past two years.

If the Democratic Party’s claim to use unused assets for the supplementary budget is realized, it will inevitably affect other projects where the budget would have been used. The issuance of government bonds, mentioned as a last resort, is the same. This ultimately means taxpayers’ money. Debt that must be repaid with taxpayers’ money because the state lacks response assets is called deficit debt.

Even assuming the supplementary budget is enacted, problems remain. A super supplementary budget amounting to tens of trillions of won could increase concerns about inflation. While the Democratic Party claims that 35 trillion won will not affect inflationary pressure, the government and the Korea Development Institute (KDI), a government-funded research institute, have different views. KDI is worried about inflation caused by the supplementary budget. There is always a cost associated with supplementary budgets. Whether inflation or national debt, it ultimately returns as a burden on the people. This is why discussions about the supplementary budget bill must be conducted alongside the recurring annual supplementary budget proposals.