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Two faces of fiscal policy: Koo Yun-cheol vs. Ahn Il-hwan

Published: 14 Oct. 2025, 00:02

Suh Kyoung-ho

The author is an editorial writer at the JoongAng Ilbo.

French sociologist Pierre Bourdieu described humans’ unconscious tendency to follow the beliefs and behavior patterns of their social class as “habitus.” This refers to the ingrained dispositions that function as a “second nature” of a group. For Korea’s Ministry of Economy and Finance (MOEF), that habitus might be a treasury keeper’s instinct — a single-minded commitment to sustainable fiscal management.

Yet even within that bureaucratic culture, differences exist. They are visible in the contrast between Deputy Prime Minister Koo Yun-cheol’s co-authored book, “Jalsanism: Inclusive Innovative Growth,” and former Senior Presidential Secretary for Economic Affairs Ahn Il-hwan’s new release, “National Debt and Economic Crisis.” Both men, top budget officials and members of the 32nd class of the civil service exam, once held nearly identical posts under the Moon Jae-in administration. Koo served as budget director and later as second vice finance minister, and Ahn succeeded him in both roles — as the baton was passed, position by position. But their fiscal philosophies diverge sharply.

Finance Minister Koo Yun-cheol shakes hands with U.S. Treasury Secretary Scott Bessent during their meeting in New York on Sept. 24, 2025. [Yonhap]

In “Jalsanism,” Koo writes, “If funds are insufficient, we must boldly issue government bonds to support innovation. That is what innovative fiscal management means.” Among his 10 principles for fiscal reform are: “Do not obsess over fiscal scale; the composition of the budget matters more,” “Do not fixate on short-term deficits or debt ratios; understand their causes” and “Do not merely worry about fiscal soundness; improve spending performance.” In essence, Koo argues that as long as spending is productive, expansionary fiscal policy should not be feared. Productive investment can stimulate growth, and as the GDP rises, the national debt-to-GDP ratio will fall, improving fiscal health.

While his optimism has appeal, it rests on subjective judgments. What constitutes a “good budget project,” and how can its performance be objectively measured? Even today, the results of the Lee Myung-bak administration’s 22 trillion won Four Major Rivers project remain in dispute.

Ahn Il-hwan offers a more cautious perspective. In “National Debt and Economic Crisis,” he warns that “the cumulative increase in national debt is inevitable,” and “when government debt surges, crisis follows.” With economic growth slowing, the population aging and welfare costs and bond interest payments rising, revenue will shrink even as spending expands. He notes that debt accumulation can be sustainable only when trust in repayment capacity is maintained: “If economic growth does not support fiscal expansion, the loss of confidence in repayment will swiftly trigger an economic crisis.”

Their greatest divergence concerns taxation. Koo dismisses tax debates as unproductive, saying, “The dispute between tax increases and cuts is futile; let us grow the economy instead.” Ahn disagrees, arguing that sustainable fiscal management requires higher revenue. He advocates introducing the “PAYGO” system — requiring any bill that creates new mandatory spending to identify its funding source — and establishing a fiscal rule to cap spending and borrowing. He contends that adopting fiscal rules will inevitably force a national debate on tax hikes to cover growing expenditures. That argument carries weight.

Even during the Moon administration — which expanded national debt by roughly 400 trillion won — concerns about fiscal discipline persisted within the bureaucracy. Hong Nam-ki, the longest-serving deputy prime minister for the economy, publicly opposed a proposal to legislate compensation for small business losses during the Covid-19 pandemic, declaring, “The budget is not a magic purse.” Then-Prime Minister Chung Sye-kyun rebuked him, saying, “Is this the Ministry of Finance’s country?” Despite frequent political pressure, Hong occasionally stood firm. “Ensuring that the nation’s finances are used in the most rational and efficient way is not the ministry’s privilege,” he said, “but a solemn duty entrusted to us by the people.”

Then–Second Vice Minister of Economy and Finance Ahn Il-hwan speaks during an Emergency Fiscal Management Review Meeting at the Government Complex Sejong on June 9, 2020. [MINISTRY OF ECONOMY AND FINANCE]

By contrast, there were no reports that Koo opposed the 13 trillion won consumption coupon program — precisely the kind of “consumptive spending” his own fiscal principles cautioned against.

The MOEF’s traditional “budget habitus” has long been one of prudence and restraint. As the government weighs new welfare commitments and long-term demographic burdens, that instinct must not disappear.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.