The fiscal policy of any state provides for a balance of all levels of the budget. The budget itself includes two parts, in one of which all items of income are indicated, and in the second - of expenses. If the number of expenses exceeds the number of revenues, then this condition is called a budget deficit. However, there may be a budget surplus - the predominance of revenue over expenditure.
It should be said that the best option is, of course, a situation in which income and expenses are equal. Indeed, the deficit and the budget surplus act as a deviation from the norm. However, balancing the income and expenditure of financial resources is very difficult. Therefore, in more detail I want to dwell on the predominance of costs.
If there is a budget deficit in the country, the current spending budget is financed first.
The budget deficit is of several types:
1. Active - appears when spending is directly higher than revenue.
2. Passive - arises as a result of lowering tax rates and lowering revenues (it is not associated with an increase in expenses).
3. The structural budget deficit appears when the state is consciously increasing it. In order to stimulate economic activity and aggregate demand during a recession, the government can reduce taxes or take special decisions to increase employment (for example, financing to create jobs).
4. Cyclic - almost independent of the fiscal policy of the state. It is characterized by a general decline in production arising at the stage of crisis and arising from the cyclical development of the economy.
5. Short-term - due to the predominance of expenses over income within one financial year. It reflects the current changes in the general state of the country's economy, which were not taken into account when drawing up the draft budget. Among the causes of its occurrence are most often noted:
- The experience of macroeconomic forecasting in government is insufficient.
- Poor accounting for possible changes in some circumstances: a fall in export prices, a decrease in production, a possible decrease in demand for manufactured products, a decrease in its competitiveness, and a sharp increase in government spending associated with inflation.
6. Long-term - represents an increase in the gap in the budget for several years between income and expenses. Its occurrence is due to reasons that are sustainable. In most countries, these are:
- Increasing the social burden on the budget.
- Undesirable demographic situation of the country, which is associated with an aging population.
- Changes in tax legislation related to its liberalization.
- An increase in the country's external debt.
- Artificially low prices (through the introduction of temporary or additional taxes, the sale of state assets, deferred payment of salaries to employees of state organizations).
- Unrecorded depreciation in the public sector.
- High inflation.
7. The real budget deficit is the difference between the nominal deficit and the percentage of government debt, which is multiplied by the rate of inflation.
8. Operating - the general budget deficit, net of interest payments of the inflationary part.
For any state, the main strategic goal is to achieve a balanced budget, but despite this, sometimes a budget deficit can act as an important tool in economic policy in macroeconomic regulation. That is why its proper use allows the state to solve a number of economic and social problems. Moreover, the main thing is that the deficit should not be long.
