Why This Year's Budget Negotiations Are Full of Obstacles... Are We Heading Toward an Unprecedented 'Semi-Budget' Crisis?

The Latest Budget Since the Introduction of the National Assembly Advancement Act
Lee Jae-myung vs Yoon Seok-yeol Criticize Each Other, Highlighting Lack of Trust Between Ruling and Opposition Parties
Conflicts Over Budget Review and Increase Approval Rights in a Ruling Minority, Opposition Majority Situation

[Asia Economy Reporter Naju-seok] Next year's budget bill is heading toward a quasi-budget crisis. The ruling and opposition parties, having already missed several deadlines, are now facing a situation where the timing of the budget bill's passage is unpredictable. Why is this year's budget review so difficult?

As of the 20th, the ruling and opposition parties are engaged in a war of words mainly over the National Assembly Speaker's mediation proposal to reduce the corporate tax top rate by 1 percentage point and to allocate the budgets for the Ministry of the Interior and Safety's Police Bureau and the Ministry of Justice's Personnel Information Unit through contingency funds.

[Image source=Yonhap News]

Despite disputes over corporate tax and other issues, disagreements persist in detailed projects... Budget negotiations remain arduous

Joo Ho-young, floor leader of the People Power Party, said at the party's floor strategy meeting the day before, "It has long passed the legal deadline for the budget, but today's situation is no different from yesterday," adding, "(There is) currently no plan for a meeting between the floor leaders of both parties, but we are requesting mediation through the National Assembly Speaker." Regarding the budget for the Police Bureau and Personnel Information Unit, which were established by enforcement decree without legal amendment, Floor Leader Joo emphasized, "These are institutions legally established within the scope of the Government Organization Act. Previously, those tasks were carried out without any basis by the President's Office of Civil Affairs, which caused various problems. This system was created to ensure transparency and fairness within the government organization. We should not deny this and obstruct it."

On the other hand, Park Hong-geun, floor leader of the Democratic Party, fundamentally called for acceptance of the National Assembly Speaker's mediation proposal. At the Democratic Party's floor strategy meeting held at the National Assembly that day, Park said, "The People Power Party must fully accept the 'Speaker's mediation proposal' even at this stage," and demanded, "If they do not accept it, they should explain the reasons and boldly present alternatives."

Summarizing the contents revealed by both parties so far, no concrete common ground has emerged, but differences over corporate tax have narrowed. However, the budgets for the National Police Agency and the Personnel Information Unit remain contentious. The opposition party argues that these organizations, created by enforcement decree without legal amendment, violate the law. If the budget is allocated through contingency funds as in the mediation proposal, it strengthens the opposition's claim.

Although statements from the leadership of both parties suggest a fierce battle over key issues such as corporate tax and the National Police Agency and Personnel Information Unit, the internal situation is more complex. The specific budget items are also contentious. Lee Cheol-gyu, the People Power Party's special committee member for budget and accounts, mentioned on MBC radio, "Besides the budgets for the National Police Agency and Personnel Information Unit, there are several other contentious issues," adding, "Cooperation has not been achieved on several parts, such as the youth cost-price housing budget, making it difficult to reach an agreement." Kim Seong-hwan, chairman of the Democratic Party's Policy Committee, also said at a press briefing, "Restoring budgets for local currency, rental housing, and senior citizen jobs is a task," and "The overall budget has not progressed due to acceptance or rejection of the Speaker's mediation proposal." The power struggle continues even over detailed projects.

For now, both parties are aiming for a comprehensive settlement. The idea is that if there is agreement on the major framework, detailed give-and-take can follow. However, since the budget processing targets have already been repeatedly missed, there are concerns that it could lead to a year-end or even quasi-budget situation.

Lee Jae-myung's shield vs. Yongsan avatar, lack of trust between ruling and opposition parties

There have been political conflicts between the ruling and opposition parties over the budget bill, but this situation is far more serious than before. Since the introduction of the National Assembly's advanced legislative procedure law, this is the first time the budget bill's passage has been delayed to this extent.

The primary reason negotiations are so difficult is the lack of trust between the two sides.

The ruling party has long argued that the opposition is using the budget bill to shield Democratic Party leader Lee Jae-myung from judicial risks. On the 15th, Kim Mi-ae, spokesperson for the People Power Party floor, claimed, "If the Democratic Party pushes through a unilateral reduction amendment, it will leave a disgraceful record in constitutional history as 'parliamentary dictatorship' and 'refusal to accept the presidential election results' for shielding Lee Jae-myung," adding, "It cannot be interpreted otherwise than as shielding Lee Jae-myung."

The opposition party, on the other hand, criticizes that the sluggish budget negotiations are due to interference from the Presidential Office. Floor Leader Park said, "Having broken the deadline once, twice, and three times, the ruling party seems to say 'the fourth time doesn't matter.' President Yoon Seok-yeol instructed the ruling party, which has already missed the deadline three times, to 'stick to principles until the end and do their best to process next year's budget bill,'" warning, "Negotiations with the ruling party, which has become a 'Yongsan avatar,' have reached a deadlock due to presidential vetoes, and as this deadlock prolongs, negative public sentiment is rising daily." He also referred to the National Assembly's constitutional budget review authority, stating, "President Yoon is sternly warned not to infringe on the National Assembly's constitutional rights any further."

In political circles, there is criticism that the combination of a ruling party minority and opposition majority, along with regime change, has caused a vicious cycle. This year is the first budget review after the regime change between the ruling and opposition parties. It is a political consensus that budget reviews are generally difficult when there is a regime change. Additionally, the conflict of authority between the government and the legislature over the budget in a ruling party minority and opposition majority National Assembly has also hindered budget processing. Our Constitution and National Assembly Act provide a framework favorable to the government and ruling party for stable budget processing. For example, they set a legal deadline for the budget bill and include automatic referral provisions for supplementary bills related to the budget. These are institutional measures to prevent obstruction by the opposition. Also, increasing the budget or creating new budget items requires government consent.

However, in a ruling party minority and opposition majority situation, the Democratic Party, which holds a majority of seats, has the power to decide the fate of the budget bill. While it is impossible to increase the government budget, it can reduce it. The legislature has the power to process amendments that cut some parts of the government's original budget. This creates a conflict between the legislature's legislative and budget review authority, especially the opposition, and the government's (+ ruling party's) authority over budget formulation and consent to increases.

[Image source=Yonhap News]

Will an unprecedented quasi-budget crisis occur?

As the ruling and opposition parties fail to find a solution for the budget bill, concerns over a quasi-budget have grown. If a quasi-budget begins, it could disrupt state administration and deepen economic burdens.

The Constitution introduced the quasi-budget system in case the budget bill is not passed, but it has never been implemented. If a quasi-budget is introduced, only mandatory expenditures and public servant salaries can be executed, making it impossible to execute discretionary expenditures, which account for about half of the budget. There are concerns about the suspension of welfare projects, which could severely impact vulnerable groups such as low-income households, the elderly, and the disabled.

The problem goes beyond the failure to execute the budget; it could impose burdens on an already deteriorating economy. With next year's economic outlook bleak, if the political circles fail to agree on the budget and expose this to domestic and international audiences, negative effects on the overall economy are inevitable.

However, the possibility of reaching a quasi-budget situation is relatively low. The Democratic Party firmly states, "There will be no quasi-budget." If a quasi-budget becomes unavoidable, they say they can process an amendment that applies reductions to the government budget bill solely by the opposition party in consultation with the National Assembly Speaker.

This content was produced with the assistance of AI translation services.