Balanced budget. Budget execution. The principle of balanced budget
Budget execution is a process that starts with the approval of the reporting law by the relevant authority. It continues throughout the fiscal year. During this process, there are a number of nuances. One of them is considered the proportionality of expenditure and income parts, or a balanced budget. Consider this point in detail.
Income and expenses
These two categories are considered central to the financial process and subsequent reporting. Execution of the budget for revenues involves the full and timely deduction of certain types of income from all sources in accordance with the adopted financial plan. These primarily include taxes and other obligatory payments. Execution of the budget for expenditures means the implementation of consistent funding of activities that are provided by law within the approved amounts.
Deficit and surplus
The principle of a balanced budget implies equality between revenues and expenditures. In the case when the former are higher than the latter, there is a surplus (surplus). Accordingly, the deficit is formed if the expenses are greater than the income. It must be said here that “deficiency-free” is not always considered a sign of a “healthy” economy. In this case, of no small importance is the reporting of which level is performed with a surplus. So, for example, over the past few years, the state budget has been characterized by an excess of revenue over expenditure. At the same time, the consolidated reporting system is scarce. The excess of expenditures over the federal budget revenues is due to the negative balance of most regional and almost all municipal budgets.
Problems of balanced budget are considered in economic theory from three sides. In accordance with the first concept, proportionality should be annual. In general, the desire to fight with all kinds of negative balance by not making state loans can provoke negative consequences for the economic condition of any country. For example, you can take the estimated increase in unemployment.Incomes of the population decrease, tax deductions are reduced. In an effort to balance the budget, the government must either raise tax rates or reduce the country's spending. Alternatively, both of these measures can be applied.As a result of these measures, an even greater decrease in aggregate demand and a continuing economic downturn will arise. This kind of fiscal policy is aimed solely at solving current difficulties. However, it does not allow to solve promising problems. In 1992, the Gaidar government pursued a policy that was based on the concept of a significant reduction in government spending on social needs, thus trying to reduce the budget deficit. As a result, it was not possible either to eliminate the negative balance, or to stop the decline in production.
Proportionality during the business cycle
According to this concept, a balanced budget is achieved in conjunction with the implementation of counter-cyclical effects. During the recession, the government has a stimulating policy. It consists in reducing taxes and increasing government spending.In other words, the government deliberately increases the deficit, stimulating growth in aggregate demand and economic growth. During the growth period, the state implements a containment policy, raising taxes and reducing expenses. The result is a surplus. The surplus goes to cover the deficit during the recession. But such a balance of the budget has a negative side. In particular, in this case, the dissimilarity of the ups and downs in duration and depth is not taken into account. Such periods are quite difficult to predict. For example, a deep and prolonged decline may be replaced by a slight and short rise. In this case, to eliminate the budget deficit will not succeed, it will become cyclical.
The third concept: secondary
Proponents of this approach believe that first of all it is necessary to stimulate economic growth. At the same time, the balance of the budget is relegated to the background, acting as a consequence of the main activities. The implementation of this idea can be accompanied by both a strong surplus and a stable negative balance.Such a picture, for example, is typical for the financial system of some countries in Europe and the USA.
Of foreign practice, of interest is the surplus of the Romanian budget of the times of Ceausescu. The communist leader was very much afraid of the negative balance and the enslavement of the country by external debts. His policies had a depressing effect on the Romanian economy, holding back investment. This was one of the reasons why his regime fell.
Many experts believe that a slight negative balance acts as a "medicine" that stimulates economic development. The role of the deficit in this case is similar to the value of the consumer loan: the benefits come directly at the moment, but it requires a lot of work to work them out. And this instead of receiving them in the future for a smaller amount. However, the state, in contrast to the household, has the ability to spend constantly more than earn. However, an excessive negative balance can become dangerous. With an increase in the budget deficit, inflation, economic instability, and an increase in the internal and external share arise. All this may eventually lead to a default.
Ways to cover the deficit
The principle of a balanced budget implies equalization of expenses and revenues. If with a positive balance does not arise special difficulties, the deficit is quite difficult to eliminate. First of all, you need to pay attention to the direction of costs. Of course, the government cannot be blamed for spending money on preparatory military activities and investments in high-yielding and knowledge-intensive industries. However, budget funds are often used to tackle a variety of short-term tasks. The deficit may arise due to the inability of management to weaken the financial claims of departments, ministries and a variety of lobbying groups. There are three ways to cover a negative balance:
- Issue of government loans.
- "Seignorage" (issue of money).
- Tax increase.
It is worth noting here that at the present time “seigniorage” is not just printing money, because it provokes inflation. The current issue is expressed in the formation of reserves of commercial banking organizations concentrated in the Central Bank. They can be used to cover the deficit. But the policy of the Central Bank, which is aimed at increasing the amount of money reserves,coming from commercial banks, provokes dissatisfaction with the latter, weakens their financial condition, reinforces contradictions within the financial system.
The balance of the federal budget with a consolidated deficit caused at one time mixed opinions of experts. Some economists called the surplus not the merit, but the mistake of the government. They believed that artificial injection of funds into the federal budget at the expense of weaning from regional and municipal funds practically eliminated the possibility of the effective operation of their authorities. Supporters of this approach say that management already knows how to create a balance in the budget of the Russian Federation. Activities in this case are aimed at preventing inflation. Experts attribute the lack of regional systems to the low quality of the financial process in the regions.
The balance of the budget is considered a mandatory requirement for the preparation and subsequent approval of the financial reporting system. It is designed to support the normal activities of the authorities at all levels.In the absence of proportionality, there may be a delay in the financing of municipal and state orders, disruptions in the budget system. This, in turn, generates defaults in the national economic sector.Especially important for Russia today is the balance of the local budget. For the implementation of the tasks of creating proportionality, special programs are developed taking into account the characteristics of a particular territory.
Methods of achievement at the stage of formation of the financial reporting system
The balance of the regional budget is achieved on the basis of the already existing consolidated financial proportionality of the territory. This forms objective prerequisites for controlling the flows both formed within, and produced outside the subject, received through redistribution and distribution channels. However, the existing format in which the consolidated financial balance, developed according to the methodology of the Ministry of Economic Development and Trade, reflects the financial capabilities and reserves of a given territory is not completely. First, the resources taken into account are separated from the money of the population and commercial banks. Accountable reserves belong to the state and certain economic entities.Such a narrowing of the categories excludes from taking into account not only the incomes of the population, but also the part saved, whose potential is quite high in an economic system with private capital. In this regard, the measurement of financial capacity with the limited scope of the movement of resources by the two sectors is unreasonable in economic terms.To implement a more accurate determination of the potential for the formation of a regional financial system, one should take into account the assets concentrated in the banking structure of the territory. On this basis, it is necessary to supplement the revenue part with indicators of the savings share of enterprises and the population.
Consolidated financial system
The balance of the state budget in its formation is achieved by the following methods:
- Limiting costs, taking into account the volume of centralized income and the characteristics of socio-economic opportunities.
- Improving the mechanism of distribution of revenues among budgets at different levels, as well as the adequate establishment of spending authority.
- Identification and mobilization of financial reserves for the revenue side.
- Formation of an effective system of budgetary control and assistance in the sector of intergovernmental relations.
- Planning areas of expenditures that have a positive impact on increasing incomes and at the same time contributing to the solution of socio-economic problems facing the society, with maximum efficiency and minimum costs.
- Reducing the size of the public sector in the economy through reasonable privatization of state property.
- Austerity through the exclusion from the expenditure of extra costs, not due to extreme necessity.
- The use of the most effective types of borrowing, contributing to revenues from financial markets.
Achieving proportionality in budget execution
The following events are held:
- Introduces cost approval procedures.
- The established limits of obligations that are focused on real incomes are strictly observed.
- Determined the optimal timing of the cost.
- A lock and cost reduction mechanism is used.
- The system of financing is being improved on the basis of a plannedthe cessation of subsidies and the full property liability of enterprises and other economic entities for the fulfillment of obligations assumed to partners and the state.
- The use of reserves and so on.
Execution of the state budget is under the responsibility of the government, the executive structure of government.