Milton Friedman, the Nobel laureate in economics, divided spending into four categories. When you spend your own money on yourself, you weigh both price and satisfaction. When you spend your own money on someone else, you are sensitive to price but less attentive to the other person's satisfaction. When you spend someone else's money on yourself, you are indifferent to price but meticulous about satisfaction. And when you spend someone else's money on someone else, you scrutinize neither price nor satisfaction. Friedman likened government spending to the fourth case — a warning that spending taxpayers' money demands strict cost-benefit scrutiny.
Korea's public finances have reached a new turning point. The total spending in next year's budget bill submitted to the National Assembly is 820.9 trillion won ($592 billion), up 12.8% from this year and the largest ever — a "super budget." On top of that, a new Future Response Fund has emerged, financed by 162.3 trillion won ($117 billion) in additional tax revenue expected from the semiconductor boom. Not all of the fund will be spent next year, of course, but the fiscal perimeter the government can reach has widened to about 983 trillion won ($709 billion). Talk of a "1,000-trillion-won treasury" no longer sounds out of place. Government spending has in fact nearly doubled over the past decade, driven by rising welfare costs. Japan, whose nominal gross domestic product is more than twice Korea's, ran a budget 2.7 times the size of Korea's a decade ago; next year the gap narrows to 1.7 times.
Not opening the wallet carelessly when taxes are flowing in is as basic to fiscal management as tightening the belt when revenue falls. Ramp up spending while intoxicated by a rush of revenue, and the moment the semiconductor cycle turns, the bill for the boom comes due. That is why the Future Response Fund warrants closer scrutiny. The government says it will lift the potential growth rate by investing in young adults, growth engines, regional areas and education. But the fund gives the government far more discretion than the general budget. Up to 30% of major spending items can be reallocated without a vote in the National Assembly, raising no small concern that it could degenerate into a government slush fund. More troubling is that the fund is set to run for about five years. Once the money runs out, those programs shift to the general account, potentially becoming a time bomb that squeezes the budget.
What matters more than the label on the budget is where the money goes. Attaching tags like "youth," "regional" or "education" does not turn every program into an investment in the future. Once handouts aimed at winning favor or free welfare benefits start being dressed up as future investment, the fund's original purpose fades fast. Spending that rises once in a boom does not shrink on its own when a downturn arrives. That is precisely how fiscal rigidity accumulates.
Warning lights are already flashing at some local governments. Gyeonggi Province has decided to cap its provincial funding share for city and county subsidy programs next year at 30%, down from 40% to 50%, citing deteriorating finances. Cities and counties facing the cuts are pushing back hard. The result is an odd cohabitation of abundance and scarcity — the central government loosening its purse strings while local governments tighten theirs.
The national balance sheet offers no room for opening the wallet without caution either. On the government's own projections, national debt swells to 1,734 trillion won by 2030. Add government-guaranteed debt of 157.3 trillion won and public corporation liabilities of 997.4 trillion won, and the potential fiscal burden alone exceeds 1,150 trillion won. Even if these do not show up in official national debt statistics for now, there is no shortage of shadow invoices that will eventually land on taxpayers.
President Lee Jae-myung has likened public finance to the seed of economic growth. He is not wrong. Miss the window to invest now in artificial intelligence, semiconductors and robotics, and the opportunity is gone. But it must not be overlooked that seeds sown in fertile soil bear abundant fruit, while seeds scattered on rocky ground can vanish without a trace.
Bigger coffers mean heavier responsibility as well as greater fiscal power. A fiscal record is not measured simply by how much money was spent during a term in office. What counts is how much potential growth was raised, how stably debt was managed, and what assets and burdens were passed to the next generation. Friedman's warning still holds at this very moment.
