A pragmatic vision: Imagining a grand coalition on the economy

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A pragmatic vision: Imagining a grand coalition on the economy

Published: 13 May. 2025, 00:01

Audio report: written by reporters, read by AI

Suh Kyoung-ho

The author is an editorial writer at the JoongAng Ilbo.

“Cutting taxes cannot rebuild a nation that tax cuts have already weakened. Populist tax cuts aimed at winning votes are irresponsible. What we need now is not lower taxes, but active fiscal engagement.”

This argument comes from Kim Dong-yeon, governor of Gyeonggi Province and a former presidential contender from the Democratic Party. In his book "Beyond Anger: Kim Dong-yeon," Kim makes a case for pragmatic fiscal policy based on his experience as deputy prime minister and finance minister. His views stand out for their nuance — he criticizes populist policies but does not blindly champion austerity.

Democratic Party presidential candidate Lee Jae-myung speaks at a conference hosted by Korea's five major business groups at the Korea Chamber of Commerce and Industry's headquarters in Jung District, central Seoul, on May 8. [NEWS1]

“There is no single right answer in fiscal policy,” he writes. “Whether to pursue expansion, restraint, or fiscal soundness depends on the economic conditions. What’s important is maintaining long-term discipline while responding to present needs.” Kim argues that the Yoon Suk Yeol administration’s fiscal approach was overly rigid. “They called it fiscal responsibility, but in reality, it was austerity that lagged even behind the nominal growth rate. It was a reverse course, and a severe one at that.”

Though he did not make it past the primary stage in the presidential race, Kim’s idea of a “grand economic coalition” remains relevant — perhaps even more so now. At first glance, the idea may seem out of touch. With one candidate far ahead in the polls and a single party poised to control both the executive and legislative branches, calls for a coalition might appear futile. However, Kim does not propose a traditional power-sharing agreement. Rather, his vision is for a bipartisan alliance focused solely on economic recovery.

“Let’s take the economy out of ideological battles and political framing,” Kim suggests. “We need a coalition-level discussion and cooperation so that responsible decisions can be made swiftly across party lines.”

From left: former DP chief Lee Jae-myung, former South Gyeongsang Gov. Kim Kyoung-soo and Gyeonggi Gov. Kim Dong-yeon pose for a photo at the National Assembly in Yeouido, western Seoul, on April 16. [NEWS1]

He proposes a series of major policy agreements — or “economic big deals” — that would require this kind of cross-party collaboration. These include regulatory reforms to spur large-scale investment from major corporations, sweeping support for companies and universities relocating to regional areas, and a public care program that shifts long-term caregiving costs from individuals to the state.

The most striking element of Kim’s proposal is this: “Let us appeal to the public to accept a 5-percentage-point increase in national debt over the next five years. We can invest 200 trillion won ($140 billion) in these economic big deals. If necessary, we must also be ready to discuss tax increases. Welfare without taxation is a fantasy.”

According to the International Monetary Fund, Korea’s government debt — including central, local, and non-profit public institution liabilities — will reach 54.5 percent of GDP this year. This surpasses the average among 11 advanced economies that lack reserve currencies. Given Korea’s aging population and low birthrate, public debt will likely grow even without additional spending. The era of boasting about fiscal discipline may be over.

Kim’s willingness to openly acknowledge this reality — and to suggest both borrowing and tax increases — is rare in Korean politics. Campaigns typically avoid such talk, fearing voter backlash. But Kim insists that responsible leadership means leveling with the public.

Estimates suggest that implementing Democratic Party candidate Lee Jae-myung’s welfare pledges—including expanded child allowances and basic income for rural communities—could cost 100 trillion won. Meanwhile, People Power Party candidate Kim Moon-soo’s proposed tax reforms, such as indexing the comprehensive income tax to inflation, could result in a 70 trillion won revenue shortfall.

In global markets, so-called “bond vigilantes” have punished governments for unsustainable fiscal behavior, as seen during Donald Trump’s presidency. These investors respond to anti-market policies and fiscal excess by selling off government bonds, driving up borrowing costs. For a small, open economy like Korea, the scrutiny is constant.

No one can say with certainty whether a 5-point increase in debt is manageable. What matters more is how that debt is used. Will it be spent on populist cash handouts or on investments that create long-term value? The global financial community will be watching closely.

The grand economic coalition Kim envisions is less about political unity and more about establishing a national consensus on priorities. It means asking difficult questions about which campaign pledges deserve to be funded first. For instance, both leading candidates have pledged to expand artificial intelligence investments and metropolitan express railway (GTX) infrastructure. Which of these takes priority? And how will the budget be allocated accordingly?

Ministry of Economy and Finance headquarters in Sejong City. [MINISTRY OF ECONOMY AND FINANCE]

In truth, few expect presidential candidates to follow through with such fiscal discipline. The electoral incentive is always to promise more, not less. Still, the idea of a national debate over economic priorities and trade-offs is a welcome one.

Kim’s proposal calls for more than just shared power—it calls for shared responsibility. His hope is to shift Korean politics away from zero-sum battles and toward constructive engagement on urgent economic challenges. Even if the political climate makes such collaboration unlikely, the vision itself offers a glimpse of what thoughtful governance could look like.

For a brief moment, imagining that kind of politics — one that builds consensus, embraces fiscal realism, and puts economic recovery ahead of partisan wins — feels like a hopeful exercise.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.