The expansive fiscal policy of the Lee Jae-myung government opens a new path for the Korean economy and democracy.

Introduction: In an Era of Crisis, a Shift in Policy is Necessary

The early 21st century Korean society is facing a complex structural crisis, affected by the aftereffects of the pandemic, global high interest rates and inflation, and supply chain crises due to the US-China strategic competition. The issues of low birth rates, an aging population, and unstable employment conditions for the youth further highlight the limitations of the existing economic and social systems. The Lee Jae-myung administration, which launched during this period of transformation in 2025, has adopted an "expansionary fiscal policy" as its core principle and swiftly formulated a second supplementary budget of 30.5 trillion won right after its launch. This can be interpreted as a strategic shift away from the cautious fiscal management emphasized by conservative and centrist governments to a proactive response to crises and a foundation for structural reform. This policy direction, which goes beyond simple economic stimulus to encompass securing growth momentum, reducing inequality, and realizing democracy, presents an important benchmark for the future path of Korean society.

Main Point 1: Economic Effects of Expansionary Fiscal Policy

This supplementary budget is designed as a comprehensive measure to stimulate consumption in response to the prolonged domestic recession and sluggish exports following COVID-19. The provision of over 11 trillion won in consumption coupons and the establishment of a safety net for construction and real estate projects worth 2.7 trillion won can contribute to a short-term boost in the economy that citizens feel. Both the Bank of Korea and the Korea Development Institute (KDI) have analyzed that this supplementary budget could raise the GDP growth rate by about 0.1 to 0.2 percentage points in the second half of 2025. This can be evaluated not merely as a fiscal expansion, but as a structural policy targeting two goals simultaneously: economic stimulation and stabilization of living conditions for vulnerable populations. It can serve as a starting point to recover economic vitality across society while overcoming the crisis.

AI and New Industry Investment and Securing Future Growth Drivers

The government plans to invest more than 100 trillion won in the AI, semiconductor, and energy transition industries in the medium to long term, in addition to the supplementary budget. This is part of a strategy to strengthen national competitiveness through technological autonomy and industrial advancement, including AI semiconductors, national large-scale language models (LLMs), and data center infrastructure development. The 'K-Mistral' project is an attempt to open up and foster open-source-based AI technology, aiming to secure leadership in the global technology ecosystem. Such investments will encourage the expansion of private R&D, create quality jobs, and lay the foundation for Korea to leap forward as a technological powerhouse.

Expanding Welfare and Strengthening the Social Safety Net

The Lee Jae-myung government is promoting the systematic expansion of universal welfare and social safety nets based on the vision of a 'basic society.' This approach is closer to the productive welfare concept that enhances the self-reliance capabilities of each citizen, rather than simply transferring income. Measures such as alleviating the debt of small business owners, resolving the blind spots in employment insurance, and expanding housing support for young people can contribute to alleviating structural imbalances and restoring social trust. This is an approach that perceives welfare not as a cost but as an investment, fostering a virtuous cycle between social stability and sustainable growth.

Main Point 2: Political and Social Implications

The Lee Jae-myung government is institutionally introducing 'public participation' in the execution process of this fiscal policy. A structure has been established where citizens can directly intervene in the budgeting and prioritization process through a public discussion committee and a citizen participation budgeting platform. This is an attempt to redefine fiscal policy not as a mere administrative technicality, but as the realization of citizen sovereignty, and it is expected to significantly enhance the acceptability and legitimacy of policies. This marks an important turning point where democracy moves from institutional form to substantive participation.

Progressive Policy Combinations: A Virtuous Cycle of Growth and Distribution

The combination of policies from this government integrates the traditional progressive camp's emphasis on welfare enhancement with the conservative camp's focus on growth. The approach that 'distribution precedes growth' rather than 'growth followed by distribution' represents a new model that seeks both economic efficiency and social inclusiveness. This can particularly resonate as 'pragmatic progressivism' with the centrist and younger generations, potentially offering a glimpse of social integration in a politically polarized Korean society. A structural shift in thinking is occurring, where better distribution leads to stronger growth.

Risk-taking Leadership: Towards Long-term Trust

Expansionary fiscal policy poses significant political burdens in the short term, such as increasing national debt and debates over fiscal soundness. However, the Lee Jae-myung administration is proposing a path that transcends the rigid existing fiscal discourse through expanded issuance of government bonds and the flexibility of fiscal rules. This is a strong expression of the will to undertake structural reforms and future investments, even at the cost of short-term political risks, and in the long run, it may lead to the restoration of trust in civil society and an innovative transformation of politics.

Conclusion: Questions and Hopes Faced by Korean Society in Transition

The expansive fiscal policy of the Lee Jae-myung government goes beyond simple economic response and presents a new coordinate of the economic and political systems that Korean society should aim for. This attempt to integrate complex challenges such as crisis response, technology investment, welfare expansion, and deepening democracy into a single policy vision is itself a political experiment and a social challenge. Of course, the obstacles of fiscal soundness concerns, political resistance, and market uncertainties are not insignificant. However, we must confront this question head-on. Are we truly ready to embrace the idea that 'distribution is a condition for growth'? Can we open the future of technology through public investment and redesign the state through citizen participation? The choices of the Lee Jae-myung government represent a response to these questions and serve as an experiment that opens the door to another possibility for the transitional Korean society. Whether it succeeds depends on how all of us engage with this change.