Blending a debit with a loan is a matter that concerns not only individuals and entrepreneurs, but also entire countries. It is one thing to draw up a budget for the year, and quite another to implement it. The state, of course, can turn to international lending, but this is far from always beneficial. In this case, there is sequestration of the budget. This procedure is legally established in the USA and some countries, while in the majority they try not to voice this name, presenting cost reduction as a necessary, but not mandatory measure.
Sequestration of the budget: what is it?
US law provides for a procedure that limits government spending to clearly defined categories. This is the sequestration of the budget. Congress accepts annual appropriations. If the expenses exceed the established ones, then a simultaneous and proportional reduction occurs in all categories. This amount is not transferred to these areas, but is left to the Treasury. The term "budget sequestration" itself is taken from the legal sciences. In the legal sciences, it means transferring property to bailiffs in order to prevent damage to it before considering a dispute in court.
The Graham-Rudman-Hollings Act and Modernity
The term budget sequestration was first used in 1985 American law. He was devoted to the whole part of the deficit-reduction act drawn up by Gramm, Rudman and Hollings. But already in 1990, it was decided to abandon strict restrictions. The new system lasted 12 years. Then for a long time sequestration was the subject of discussion by experts. But in 2011, this procedure became an integral part of the Budget Control Act. With the help of this bill, it was possible to solve the problem of exceeding the established debt limit. A Debt Reduction Committee was created. Sequestration of budget expenditures is the last measure that can be applied if Congress fails to pass a law on spending cuts. Many experts spoke about budget sequestration in 2013. To the delight of taxpayers, the government managed to avoid this.
The budget process in Russia
Each year, the government forms a federal law that shows how the country's population will live. Then the budget is signed by the President and takes effect. The fiscal year in this case fully coincides with the calendar. The main components of the budget are income, expenses and their difference. There is a deficit in the Russian Federation, that is, government costs are not covered by tax and other revenues. If 50 billion is income and expenses are 150, it means that the country needs to find somewhere inadequate 100. Deficit is a balancing item. You can put there any amount you want, but from this in the state additional money will not appear. If there are no resources to finance certain projects, then this is simply a hoax to the population. Moreover, this state of affairs creates a precedent for the uncontrolled use of funds: one article can be reduced by 10%, another by 50, and a third completely removed. But can it be said in this case that the budget is being implemented? Nevertheless, this is often what happens in Russia.
Deficit coverage
If there is not enough money, then it is logical to borrow it somewhere. It is clear that then they will have to be given back with interest, but here the crisis current situation comes to the fore, and not dreams of good prospects. The sources of deficit include borrowing from individuals and legal entities, as well as international organizations and other states. The problem with the latter is that their loans are often associated with political influence on the internal situation in the country with a shortage of funds.
In addition, the state can issue bonds that are bought by individuals and legal entities. But it’s important to understand that money will have to be paid sooner or later, therefore budget expenditures should not be connected with populist slogans, but with really promising sectors with high returns.
Functional classification
In order not to have to sequestrate the budget in the future, it is important from the very beginning to correctly establish the costs of certain industries. The functional characteristic shows where the money is spent. For example, it can be used to find out how much money was spent on implementing management, defense, health care and education. Moreover, this characteristic is the same for all subjects of the Russian Federation. Further, all expenses and income are reduced to the consolidated budget. In its most general form, it consists of three parts: the content of ministries and other administrative bodies, interaction with territories, and the implementation of certain development programs. As for transfers, they do not have a targeted focus. General expenses for the subject of the federation are considered according to the norms. This means that some regions may have a higher cost factor (for example, North).
