If regional and welfare packages are expanded, spending centered on commercial areas will be repeated annually, creating a structure that increases the burden on local finances and national funds. [Graphic=Hanmi Ilbo]

As the regional and welfare packages, including regional gift certificates, rural basic income, the 4.5-day workweek, and youth future savings, become a core pillar of the Lee Jae-myung administration's 2026 budget proposal, concerns are growing that these programs, separate from the government's emphasis on 'livelihood safety nets, balanced development, and expanded youth opportunities,' may become a permanent expenditure structure rather than temporary support.

Especially considering the speed of South Korea's debt increase and the risk signals of the private credit gap, which have been repeatedly warned by the IMF and BIS, this package is not just a welfare item but a variable that can alter the future fiscal path itself. The private credit gap is an indicator that measures how excessively household and corporate borrowing (credit) is inflated compared to the normal trend of the economy's scale (GDP).

While the budget for regional gift certificates is 1.15 trillion won, their issuance scale reaches 24 trillion won combined by local governments.

The issue is not the amount, but the fact that this expenditure structure has shifted from 'discretionary allocation' to 'mandatory national funding.' As projects that could be adjusted annually based on fiscal conditions are automatically reflected through legal amendments, regional gift certificates have become a recurring, permanent expenditure regardless of the economy, imposing a fixed cost burden on both local and central governments.

Considering the economics community's assessment that gift certificates have 'limited aggregate demand increase effects and mostly reallocate consumption,' it has become a politically entrenched expenditure that is virtually impossible to abolish, despite its limited effects.

Rural basic income, although called a pilot project, is closer to a 'main project considering its political significance.'

The program, which pays 150,000 won per month to 240,000 people in six depopulating regions, starts at a scale of 170 to 200 billion won, but once payments begin, it becomes extremely difficult to halt for political reasons. Basic income has the strongest fixed expenditure structure among welfare items, so unlike the government's explanation that 'the burden is small as it's a pilot project,' pressure for expansion arises immediately. Therefore, basic income automatically generates accumulation of 'shadow expenditures' not reflected in the actual budget.

The 27.7 billion won in labor cost support for the 4.5-day workweek also appears to be a short-term experiment but is likely to become a starting point for the government to bear labor costs structurally.

As working hour reductions spread, costs to maintain productivity and companies' labor cost burdens increase simultaneously, creating a structure where the government covers these burdens for policy reasons. In other words, this project is not a 'support project' but rather a starting point for fixing a new type of expenditure: 'fiscal transfer of costs for the spread of reduced work hours.'

The Youth Future Savings, too, appears to be a short-term support project of 744.6 billion won on the surface.

It is an accumulating expenditure structure where up to 360,000 won per year is paid for three years to young people with an annual income of 60 million won or less, with new subscribers continuously joining each year.

Despite the existence of about 6 to 7 similar existing policies such as Youth Tomorrow Savings, Youth Hope Savings, and Youth Tomorrow Accumulation Fund, the addition of a new savings structure makes a step-wise increase in youth welfare budgets inevitable.

While the figure of "around 700 billion won for this year's budget" may seem small, when considering the cumulative structure, the newly accumulating expenditure each year carries over as a fixed cost to the following year.

The reason these four projects, with their different characteristics, are simultaneously becoming de facto permanent expenditure structures (fixed costs) is that political structures play a stronger role than fiscal logic.

Each project is designed to directly connect regional bases and youth bases, and any suspension or reduction directly leads to political losses. Experts point out that 'items that are difficult to discontinue once started quickly become fixed costs,' and this is precisely the structural risk of the 'Lee Jae-myung-style' budget.

The problem is not the scale. What the IMF and BIS warn about is 'speed' and 'structure.'

South Korea already has a private credit gap in a risky zone for a long period, its national debt increase rate is among the highest in the OECD, and its managed fiscal balance is stuck in the negative 4% range. If permanent expenditures are added in this state, the fiscal structure will shift from short-term budgets to a fixed-cost-centric structure, reducing maneuverability and weakening the ability to respond to economic fluctuations. Ultimately, this becomes a 'structural cost' that erodes future investment capacity.

In conclusion, while regional gift certificates, rural basic income, labor cost support for the 4.5-day workweek, and youth future savings may not seem large when viewed by annual budget, when combined with political, regional, and generational structures, they alter the fiscal path in the form of 'sustainability.'

Over 5 or 10 years, the fiscal structure is likely to be reorganized around consumption-oriented fixed costs rather than future strategy and growth investments, making it clear that the real issue with the 'Lee Jae-myung-style' regional and welfare package is sustainability, not the amount. Sustainability, in turn, narrows fiscal options and operates in a direction that constrains the South Korean economy's ability to respond.

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