Written by Meng Kit Tang.
Image credit: 03.18 總統接見「第八屆玉山論壇」訪賓 by 總統府/ Flickr, license: CC BY 2.0.
A Political Test for Taiwan’s New President
Just months into his presidency, Lai Ching-te is facing a crisis that could define his leadership. A budget showdown with an opposition-controlled legislature has stalled government spending plans, sparking fierce debate over defence funding and executive power. The Kuomintang (KMT) and Taiwan People’s Party (TPP) control the Legislative Yuan, giving them the ability to check the ruling Democratic Progressive Party (DPP). Their decision to slash over NT$207 billion from the government’s proposed budget has intensified partisan tensions. This standoff is more than a fiscal dispute. It is a test of Lai’s ability to govern in an era of divided government. Unlike his predecessor, Tsai Ing-wen, who had a legislative majority for most of her presidency, Lai must navigate opposition resistance to pass his policies. His ability to strike a balance between firm leadership and strategic negotiation will determine whether he emerges as a capable leader or finds his administration stalled by political obstruction.
The Stakes of the Budget Crisis
The budget cuts go beyond routine financial oversight. They represent a broader struggle between the executive and legislative branches over who controls Taiwan’s governance. The most controversial reductions focus on defence spending, particularly Taiwan’s indigenous submarine programme. This initiative, launched under Tsai’s administration, is central to Taiwan’s long-term defence strategy against growing military pressure from China. Premier Cho Jung-tai has condemned the cuts as “suicidal,” warning that they could weaken Taiwan’s ability to deter threats. The DPP argues that defence spending should remain a national priority, especially given China’s increasing military presence in the Taiwan Strait. With Beijing intensifying air and naval activities near Taiwan, any delay in military funding could undermine the island’s preparedness.
The opposition, however, sees the cuts as necessary to restore fiscal discipline. The KMT and TPP claim that defence spending has grown excessively under the DPP and requires more oversight. They argue that projects like the submarine programme lack transparency and need stronger financial scrutiny before more funds are allocated. For them, this is not just about reducing costs; it is about reinforcing the legislature’s role as a check on executive power.
The Broader Implications for Taiwan’s Security
The impact of these defence cuts extends beyond Taiwan’s internal politics. The island’s security strategy depends on maintaining strong deterrence capabilities, especially as Beijing continues to assert its territorial claims. A well-funded defence budget reassures Taiwan’s allies, including the United States and Japan, that the government is committed to self-defence. If Taiwan signals uncertainty about its military investments, it may weaken international confidence in its ability to resist external threats.
China has already taken note of Taiwan’s domestic political divisions. A prolonged budget standoff could be perceived as a sign of instability, potentially emboldening Beijing to escalate military pressure. This raises an urgent question: can Taiwan afford political gridlock at a time when national security is at stake? Lai must make the case to both lawmakers and the public that defence funding is non-negotiable. He cannot allow political disputes to derail Taiwan’s security planning. If the opposition insists on blocking defence expenditures, they risk being seen as undermining Taiwan’s national interests.
Lessons from Taiwan’s Political History
Taiwan has faced similar political gridlock before. The experiences of former Presidents Chen Shui-bian and Tsai Ing-wen offer contrasting lessons for Lai as he navigates this crisis. Chen Shui-bian, Taiwan’s first DPP president, governed with an opposition-led legislature for most of his two terms. His administration faced constant legislative obstruction, particularly from the KMT-controlled Legislative Yuan. Key policies, including military procurement plans and economic reforms, were repeatedly blocked. The inability to secure cross-party agreements led to political paralysis, damaging Chen’s credibility and weakening his ability to govern effectively.
Lai must avoid repeating Chen’s mistakes. If he adopts a confrontational approach without a strategy for building consensus, he risks falling into the same cycle of legislative deadlock. Prolonged conflict could make it difficult to pass even routine government measures, undermining public confidence in his administration. Tsai Ing-wen, by contrast, provides a model for how a leader can maintain authority despite political setbacks. After the DPP’s significant losses in the 2018 local elections, she shifted her focus from conflict to national security and economic stability, aligning her policies with public interests.
To strengthen Taiwan’s defence, she increased military funding to over NT$411 billion and allocated NT$49 billion for the Indigenous Defence Submarine Program. Tsai also prioritized asymmetric warfare by investing in missile defence, drones and cyber defence. All these were done to enhance Taiwan’s deterrent capabilities. In 2020, she introduced the Anti-Infiltration Act to combat foreign interference, particularly from China, aiming to protect Taiwan’s democracy and bolster public trust in her leadership. Economically, Tsai sought to reduce Taiwan’s dependence on China through her New Southbound Policy. This strengthened trade ties with Southeast Asia, South Asia, and Australia. She also invested heavily in the semiconductor industry, securing subsidies to keep Taiwan’s tech sector competitive globally.
Tsai bolstered Taiwan’s relationship with the United States with the acquisition of F-16V fighter jets and missile defence systems while also fostering economic partnerships within global semiconductor supply chains. These initiatives elevated Taiwan’s strategic significance and its position on the world stage. Tsai’s strategy not only restored public confidence but also paved the way for her significant re-election in 2020, offering important insights for Lai on how to align policies with national priorities and garner international backing. Lai can learn from Tsai’s ability to manage political challenges. He needs to rally public opinion around key national priorities and use that momentum to pressure the legislature into cooperation. If he can frame the opposition’s budget cuts as a direct risk to Taiwan’s security, he may be able to shift political pressure onto his rivals.
Lai’s Strategic Choices: Confrontation or Compromise?
Lai faces a tough decision in the budget crisis. He can confront the opposition by rejecting negotiations and labelling their budget cuts as reckless. This may energize DPP supporters but worsen the political deadlock and harm his leadership image. Alternatively, he could seek alliances with the more compromise-friendly TPP and identify common ground for negotiation, such as agreeing to increased oversight on defence spending while securing funding for key military projects. This approach could help him break the impasse without undermining his authority, thus demonstrating effective governance.
Public opinion will be crucial to Lai’s strategy. If voters see the opposition as obstructing government operations, it could harm the KMT and TPP in future elections. Conversely, if Lai fails to overcome legislative challenges, his presidency may be seen as ineffective. He must carefully shape the political narrative to portray himself as a responsible leader committed to Taiwan’s long-term stability.
The Defining Moment of Lai’s Presidency
The budget crisis is a critical test for Lai Ching-te’s presidency, impacting his leadership reputation and governance in a fragmented political landscape. If he successfully navigates this challenge, he could emerge as a capable leader adept at managing Taiwan’s complex dynamics by rallying public support and forming key alliances. However, failure to resolve the budget impasse may lead to political gridlock, jeopardizing Taiwan’s stability amid external threats. Lai’s decisions in the coming months will be crucial for both his presidency and Taiwan’s geopolitical manoeuvrability.
Tang Meng Kit is a master’s student in the MSc in International Relations Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore. His research interests include cross-Straits relations, Taiwan politics and policy issues and aerospace technology. He currently works as an aerospace engineer.
This article was published as part of a special issue on ‘Taiwan’s Budget Crisis’.
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