Separation of Budgetary Powers Between the National Assembly and the Executive: Toward a New Balance in Korea
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Writer
CFE
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In many Western countries, the central issues in fiscal management have changed considerably over time since the emergence of the modern state. In the early period of transition from absolute monarchy to the modern state, an important task was to have the budget deliberated and approved by parliament and to observe the principle of a balanced budget in order to reduce the tax burden. However, in the 19th century, the United States and France began to realize that, as parliament played a central role in fiscal management, budget operations had in fact become wasteful and deceptive. To address this problem, the United States established an executive-centered budget system in the 1920s, while France, not until the 1950s, carried out a constitutional revision that effectively neutralized parliament’s budgetary power.
After the 1960s, all Western countries operated executive-centered budget systems and, in particular, adopted Keynesian fiscal management, which held that budget deficits should be actively accepted in order to achieve full employment. As a result, during the two oil crises of the 1970s, they faced economic crises marked by stagflation—simultaneous increases in inflation and unemployment—as well as threats to fiscal sustainability arising from rising welfare spending and growing public debt. Reflecting on this experience, from the 1980s onward parliaments began to recognize the need to impose strict fiscal rules on the executive. By the 2000s, many experts had come to see that, in order to resolve conflicting competitive demands in fiscal management smoothly and achieve social prosperity, an appropriate separation of budgetary powers between parliament and the executive, in addition to political institutions themselves, was an important means of doing so.
Increasingly, many scholars began comparing countries that had experienced fiscal crises with those that had not, and started exploring best practices for how the separation of budgetary powers between parliament and the executive should develop. Through various case studies not only of OECD countries but also of Latin American and Asian countries, efforts began in earnest to identify the proper direction for separating budgetary powers. Their general conclusions were that: (1) parliament should take the lead, through strategic deliberation, in setting the overall budget size and sectoral fiscal allocations; (2) the executive should systematically review all competing demands on the budget according to established principles and formulate the budget accordingly; and (3) parliament should check the executive through ex post settlement review, examining the efficiency, effectiveness, legality, and related aspects of detailed programs.
The long historical experiences of Western countries and the useful cases drawn from major countries around the world have significant implications for Korea today. Since the introduction of direct presidential elections in 1987, Korea has achieved political democratization in many areas, but from the 2000s onward, an increasing number of political demands and conflicts have emerged in connection with budgeting and fiscal management. Not only have allocations across policy areas and sectors—such as increased welfare spending, demands for balanced regional development, expanded R&D budgets, and adjustments to education budgets—drawn attention, but budget formulation for specific detailed projects such as large-scale development projects, reductions in public utility charges, and price stabilization for essential goods has also increasingly become the focus of political attention. In this process, demands to strengthen the National Assembly’s budgetary power have been raised without interruption.
Calls to strengthen the National Assembly’s budgetary power have come from both ruling and opposition parties alike, and they uniformly cite “the introduction of the legal-budget principle” and “the adoption of a full-fledged American-style budget system” as their core arguments. They argue that by introducing the legal-budget principle, the budget should be treated as falling within the category of legislative power, thereby effectively nullifying the executive’s power to formulate the budget and strengthening the National Assembly’s involvement in budget formulation. They also maintain that it is necessary to adopt the U.S. presidential budget system, in which the constitution explicitly vests the power of the purse in Congress. Yet most of these arguments remain at the level of the 1788 U.S. Constitution and the constitutional debates of Germany and Japan before World War II.
This study seeks to propose a model direction for the separation of budgetary powers in Korea, based on the historical experiences of OECD countries that have developed fiscal democracy through long trial and error, as well as international comparative studies on the best practices countries should pursue. To this end, the study divides the budget cycle into four stages—budget formulation, budget approval, budget execution, and settlement review—and broadly compares the practices of major advanced countries with those of Korea. The findings for each comparison may be summarized as follows.
First, budget formulation is led by the executive in every country in the world. However, attention should be paid to the fact that in major countries such as the United Kingdom, Germany, and France, parliament is not allowed to propose bills that increase expenditures or reduce revenues. Unlike those countries, Korea’s National Assembly is subject to no restrictions whatsoever in enacting or revising budget-related enabling laws, including legislation exempting projects from preliminary feasibility studies. Of course, the United States is a unique case worldwide in that Congress possesses unlimited budgetary power, and this too should be kept in mind. Moreover, although parliaments in OECD countries substantially lead decisions on the aggregate fiscal envelope and sectoral fiscal allocation, Korea’s National Assembly, by contrast, has actually opposed legislation on fiscal rules, which also deserves attention.
Second, budget approval is naturally the power of parliament in a democracy. However, the revisions made by Korea’s National Assembly to executive budget bills may be said to be excessively extensive to a degree rarely seen anywhere in the world. Moreover, in Korea, the National Assembly can unilaterally cut the budget, which in a divided government may lead to disorder in state affairs. In general, in parliamentary systems, budget amendments by parliament are extremely limited because they can lead to the dissolution of parliament, and even under France’s semi-presidential system, parliament’s budgetary power has been effectively neutralized, so parliamentary budget amendments are rare.
Third, budget execution must naturally be carried out by the executive, and parliament should not intervene. Parliamentary approval of the budget means only that “expenditure may be made,” not that expenditure must necessarily be made. To that extent, considerable discretion is recognized in the executive’s budget execution. In addition, in most OECD countries, parliamentary budget approval distinguishes between legislative items and administrative items. In Korea, however, this practice has not been properly established, which appears to be because the executive hesitates to exercise its discretion for fear of backlash from the National Assembly.
Fourth, settlement review is an inherent function of parliament, and the extent to which this function is activated may be regarded as the core of fiscal democracy. In settlement review, the focus should not be on political controversy over the selection of individual projects, but rather on monitoring how well effectiveness, efficiency, and legality are being observed in project implementation. This may be called policy audit, and the results of policy audit should be fully fed back into budget formulation. Regrettably, no such function can be expected at all from the settlement review conducted by Korea’s National Assembly.
Based on the problems identified in the four stages of the budget cycle, this study proposes five tasks to establish the proper direction for the separation of budgetary powers in Korea. First, the National Assembly’s leadership in determining the aggregate fiscal envelope and sectoral fiscal allocation should be codified. Second, a practice must be established of prohibiting the National Assembly from enacting legislation that entails budget outlays or reduces revenue. Third, legislative items and administrative items must be strictly distinguished so that the respective jurisdictions of the National Assembly and the executive over the budget are clearly separated. Fourth, each year’s budget resolution by the National Assembly should codify procedures for budget amendments so that the media can adequately monitor so-called “pork-barrel budgets.” Fifth, a separate settlement review committee should be established in the National Assembly and its functions activated so that policy audit can be properly carried out.
Prologue
I. Introduction
II. Background of the Discussion – Existing Debates
1. Debates on Korea’s Fiscal Constitution
2. International Comparative Institutional Studies
III. Budget Formulation Stage
1. Cases of Major Advanced Countries
2. Korea’s Current Status
IV. Budget Approval Stage
1. Cases of Major Advanced Countries
2. Korea’s Current Status
V. Budget Execution Stage
1. Cases of Major Advanced Countries
2. Korea’s Current Status
VI. Settlement Review Stage
1. Cases of Major Advanced Countries
2. Korea’s Current Status
VII. Basic Direction for the Separation of Budgetary Powers in Korea
1. National Assembly-led Aggregate Budgeting and Sectoral Fiscal Allocation
2. Prohibiting National Assembly Legislation that Entails Budget Outlays or Revenue Reduction
3. Strict Distinction Between Legislative Items and Administrative Items
4. Codification of National Assembly Budget Amendment Procedures
5. Separation and Functional Activation of the National Assembly’s Settlement Review Committee
References
Wiki:
https://www.cfe.org/w/bbsDetail.php?&idx=46
Original title: 국회와 행정부의 예산권력 분립: 한국의 새로운 균형에 대하여
Author: Dong-seok Ok
Date: 2025-05-15
Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=1&idx=27651