Discretionary budgetary tax policy. Discretionary fiscal policy

21. Discretionary and non-discretionary fiscal policy.

Discretionary fiscal policy- purposeful change in government values expenses, taxes and government balance budget as a result of special government decisions aimed at changing the level of employment, production volume, rates inflation And balance of payments situation.

An important component of fiscal policy is change government spending, which have an impact on aggregate demand similar to investment, and, like investment, have a multiplier effect. The multiplier for government purchases of goods and services shows the change in output (income) as a result of changes in government spending. Changes in government spending, as well as changes in private investment, serve as an impetus to awaken the process of multiplying national income. By increasing expenses during periods of decline in production and reducing them during economic booms, the state softens the cyclical nature of economic development and achieves a smoother growth in national output.

One of the tools of discretionary fiscal policy is changes in taxation. Let's consider how the introduction of an autonomous (cord) tax will affect the volume of national income - a tax that has a strictly specified amount, the value of which remains constant when total income changes.

Government discretionary policies are associated with significant internal time lags, since changes in the structure of government spending or the tax system require lengthy discussions of these measures in parliament.

Non-discretionary fiscal policy is based on the action of built-in stabilizers, ensuring the natural adaptation of the economy to phases economic cycle through automatic changes in government spending, taxes and government budget balances as a result of cyclical fluctuations in total income. Non-discretionary fiscal policy is implemented through changes in the levels of tax revenues and government spending that do not depend on the decisions of government agencies.

Built-in (automatic) stabilizer is economic mechanism, automatically responding to changes in economic conditions. Built-in stabilizers include taxes, unemployment benefits, social payments, etc. They serve to soften the economy’s response to changes in the output of goods and services, price levels and interest rates.

The main advantage of non-discretionary fiscal policy is that its instruments (built-in stabilizers) are activated immediately at the slightest change in economic conditions, i.e. There is practically no time lag here.

The disadvantage of automatic fiscal policy is that it only helps smooth out cyclical fluctuations, but is not able to eliminate them. It should be noted that the higher the tax rates and the value of transfer payments, the more effective the non-discretionary policy.

22.Multipliers of government spending, transfers, taxes and a balanced budget.

Government expenditure multiplier represents the ratio of the change in equilibrium GNP to the change in the volume of government spending.

The government spending multiplier shows the increase in GNP as a result of an increase in government spending per unit: m G =1/(1-MPC) MPC – pre-advancement to consumption.

Tax multiplier- is equal to the ratio of changes in equilibrium output (income) as a result of changes in tax revenues to the budget.

The tax multiplier model in a closed economy with a progressive tax system has the form: m t = -MRS/(1-MRS)

Changes in taxes have less impact on the value of aggregate expenditures, and therefore on the volume of national income, since tax increases are partially offset by a reduction in aggregate expenditures, and partly by a decrease in savings, while changes in government purchases affect only aggregate expenditures. Therefore, the tax multiplier is less than the government spending multiplier.

Cartoonist balanced budget - an equal increase in government spending and taxes causes an increase in income by an amount equal to the increase in government spending and taxes; a numerical coefficient equal to one.

The transfer multiplier is a coefficient that shows how many times total income increases (decreases) when transfers increase (decrease) by one. In its absolute value, the transfer multiplier is equal to the tax multiplier, but has the opposite sign. The value of the transfer multiplier is less than the value of the expenditure multiplier, since transfers have an indirect effect on total income, and expenditures (consumer, investment and state procurements) - direct.

Discretionary fiscal policy is a set of measures by which the legislature manipulates the tax system and government spending in order to change the real volume of national output and employment, control inflation and accelerate economic growth in order to maintain high level economic activity.

During economic downturn and depression, an expansionary fiscal policy is being pursued. Increase in total spending (consumption, investment, government spending, net exports).

A deficit budget, which provides for an increase in government spending, a decrease in tax burden.

In conditions of demand inflation, a contractionary fiscal policy is necessary. Its measures are of the opposite nature - reducing government spending and increasing the tax burden. This budget will be in surplus.

Automatic budget policy is an economic mechanism that adjusts economic development in order to curb planned undesirable trends automatically, i.e. without requiring revision tax legislation, transfer payment systems, approval or restructuring of the state budget.

If the country experiences high rates economic growth, there is a high probability of inflation. However, it will be maintained due to increased tax revenues and a decrease in the amount of transfer payments from the state budget. The tax base is expanding (increasing gross profit, total wage fund, total value of property), the number of enterprises in need of subsidies is reduced, and the population for which benefits are paid (the number of poor, unemployed) is reduced.

During an economic downturn, the processes discussed above proceed in the opposite direction, which counteracts the undesirable decrease in GDP.

Factors that reduce efficiency budget policy:

• 1. Inertia of the system for making and implementing necessary decisions. As a result economic situation in the country may change and require different measures.
• 2. When short term Until new legislative elections, politicians are unlikely to make such unpopular decisions, although the economic climate may require it.
• 3. Foreign economic relations. For example, in the context of an economic recession or depression, a country pursues an expansionary fiscal policy. This policy increases the demand for money from private investors. Inflow foreign currency to the country increases, raising the national rate. This limits the country's export capabilities and stimulates imports. National export-oriented production is declining. Decrease in GDP.
• 4. Inflation, in the conditions of which, as already noted, the planned increase in expenses in real terms is noticeably reduced, the effect of the multiplier of total expenses is weakened, which reduces the magnitude of the increase real GDP. In addition, inflation affects the growth of interest rates in the country. This further reduces private investment in production, limits current consumption of the population and leads to negative impact on the economy.

Under fiscal policy understand the set of measures taken by government agencies to change government spending and taxation. Its main objectives are: smoothing fluctuations in the economic cycle, ensuring sustainable rates of economic growth, achieving high levels of employment, and reducing inflation. Government purchases of goods and services and transfers represent expenditures of the state budget, and taxes are the main source of budget revenues, therefore fiscal policy is also called fiscal policy.

Expansionary fiscal policy is carried out by increasing government spending and reducing tax rates, which, as a rule, leads to an increase in the budget deficit. The government will cover the overexpenditure (deficit) through loans from the population, insurance companies, industrial firms, etc. It can also borrow from central bank. Expansionary fiscal policy is carried out when the economy is operating below its potential.

Contractionary fiscal policy is based on cutting government spending and increasing tax rates.

The instruments of fiscal policy are expenditures and revenues of the state budget, namely:

• · state procurements;
• · taxes;
• · transfers.

Expansionary fiscal policy is applied during a recession and aims to reduce the recessionary output gap and reduce the unemployment rate and is aimed at increasing aggregate demand(total expenses). Its tools are: a) increasing government procurement; b) tax reduction; c) an increase in transfers.

Contractionary fiscal policy is used during a boom (when the economy is overheated) with the goal of reducing the inflationary output gap and reducing inflation and is aimed at reducing aggregate demand (aggregate expenditures).

Its tools are: a) reduction of government procurement; b) increase in taxes; c) reduction in transfers.

Types of fiscal policy: stimulating and restrictive, discretionary and automatic. Built-in stabilizers

Discretionary policy is the deliberate manipulation of taxation and government spending by the legislature in order to influence the level of economic activity. This is the impact on changes in output, employment, price levels and acceleration of economic growth. Legislative bodies act purposefully, passing relevant laws regarding the volume of government spending, tax rates, the introduction of new taxes, etc.

Discretionary contractionary fiscal policy involves reducing government spending and increasing tax rates. Discretionary expansionary fiscal policy involves increasing government spending and reducing tax rates. Discretionary policy is complicated by the time factor.

Automatic fiscal policy is automatic changes in the level of tax revenues, independent of government decisions. It is the result of the action of automatic or built-in stabilizers.

Automatic stabilizers are government revenues or expenditures that automatically adjust in the opposite direction to changes in national income. For example, unemployment benefits or income tax, which smooth out fluctuations in the curve of total expenses and income.

Fiscal policy: impact on equilibrium in the goods market. Inflationary and deflationary gaps

Fiscal policy - government manipulation. expenses and taxes to achieve basic ec goals. FP involves an analysis of government activity in the distribution of expenses (government purchases, net transfer payments to the private sector, repayment of government debt) and revenues (tax revenues, funds received from the sale of goods and services; funds received to eliminate the state budget deficit).

To analyze the functioning economic systems in conditions not full employment resources. use Keynesian model of planned and actual expenditures, which compares the values ​​of actual equilibrium national income and non-inflationary potential national income.

1. Deflationary gap. When in part-time employment the actual values. Equilibrium income y0< потенциального объема выпуска уf. В этом случае недостаток сов. спроса AS по сравнению с сов. предл формирует в экономике дефляционный (рецессионный) разрыв. Перспективы развития данной ситуации: либо правительство соглашаясь с имеющейся конъюнктурой пойдет на дефляцию цен, что вызовет сокращение объемов выпуска, формирование условий вынужденной безработицы и установление объемов производства на уровне у0, либо правительство может использовать метод активной фискальной политики, увеличивая гос. расходы и снижая налоги, тем самым расширяя сов. спрос до уровня А и обеспечивая рост занятости населения и увеличение объема выпуска до Уf, либо правительство может стимулировать не значит увеличение сов. спроса пользуясь политикой сбалансированного бюджета (одновременный рост госрасходов и налогов).

2 . Inflationary gap.

When the actual equilibrium national income at 0 exceeds the potential non-inflationary level. In this case, an excess of owls. demand over owls the proposal forms the conditions for the inflation gap, the magnitude of which is determined by the segment CD. Prospects for the development of the situation: either the economy will experience an increase in the general price level, a reduction in marketable output Y f. and a gradual increase in employment, or the government using unpopular measures will reduce the volume of owls. demand through tax increases and government cuts. expenses, i.e. will use contractual fiscal policy (transfer the curve of planned expenditures to a state of macro-equilibrium in point D).

Fiscal policy (fiscal policy) is one of the most important (along with monetary policy) methods for implementing state economic policy. It involves the manipulation of government spending and taxes in order to achieve macroeconomic stabilization. There are discretionary and non-discretionary government policies. Discretionary policy - this is the purposeful adoption of certain measures to stimulate the economy during a recession and contain the economy during a boom. Non-discretionary policy (automatic policy, policy of using built-in stabilizers) is the adoption and legislative consolidation of any measures that subsequently operate without special government intervention. Discretionary fiscal policy — conscious manipulation of government spending and taxes in order to implement macroeconomic stabilization. There are discretionary expansionary and discretionary contractionary fiscal policies. Discretionary expansionary fiscal policy assumes an increase in government spending and a reduction in tax rates. Discretionary contractionary fiscal policy assumes a reduction in government spending and an increase in tax rates. Discretionary expansionary fiscal policy will be accompanied by an increase in the government budget deficit, i.e. accumulating excess of expenses over income. It is carried out in order to combat recessions, unemployment and is accompanied by an increase in money supply or rising interest rates. Graphically, the result of stimulating fiscal policy shows famous model"Aggregate demand - aggregate supply" The graph shows that stimulating fiscal policy leads to an increase in aggregate demand, real output grows from Y1 to Y2. But these measures can only be carried out on the Keynesian segment of the aggregate supply curve. In the vertical segment, they will result in pure inflation and will not provide a stimulating effect. Thus, the implementation of discretionary fiscal policy is complicated by the difficulty of choosing the right moment for its implementation, and accurately understanding where the economy is on the aggregate supply curve. These problems can be mitigated to some extent by non-discretionary (automatic) fiscal policy, which is also called the built-in stability policy. Automatic fiscal policy - These are automatic changes in the level of tax revenues that do not depend on government decisions. A good example of automatic fiscal policy is progressive (and even proportional) taxes. In case of a recession, incomes fall, but taxes also fall, and this slightly stimulates the economy to grow. In the event of a boom, “overheating,” incomes rise, but taxes also rise, and this slightly restrains further growth, which is fraught with a crisis of overproduction. Of course, built-in stabilizers are not omnipotent, they cannot solve all problems, but this type of policy successfully plays the role of a shock absorber in the economy and complements discretionary measures. In general, we can say that the budget deficit acts as a stimulus for economic development, and budget surpluses act as a restraining element.

Wikipedia

Definition of tax and fiscal policy

Taxes and government fiscal policy

Tax- mandatory, individually gratuitous payment, forcibly collected by authorities state power various levels from organizations and individuals in order to financial security activities of the state and (or) municipalities

Fiscal policy– the impact of the state on the level of business activity through changes in government spending and taxation. Fiscal policy affects the level of national income and therefore the level of output and employment, as well as the price level. It is aimed against undesirable changes in economic conditions associated with both unemployment and inflation. The state budget– leading link financial system. It combines the main income and expenses of the state.

Main objectives of budget policy:

1) keep the economy from declining production;

2) ensure financial stability (enlargement money circulation, reducing the budget deficit, suppressing inflation);

3) stimulate investment activity;

4) strengthen the budget revenue base by improving taxation and strengthening control over the completeness of tax payment;

5) create a system of effective control over the effective and targeted use of state funds. expenses;

6) strengthen control over the size of the state. debt.

Fiscal policy usually divided into two types: discretionary (flexible) And non-discretionary (automatic).

Discretionary fiscal policy- this is conscious manipulation legislative branch taxation and government spending to influence the level of economic activity.

It's about about the impact on changes in output, employment, price levels and acceleration of economic growth.

In this definition, it is important to note that legislative bodies act purposefully, adopting relevant laws regarding the volume of government spending, tax rates, the introduction of new taxes, etc.

All these measures have an impact on both aggregate demand, and on aggregate supply.

Within Keynesian approach discretionary fiscal policy has a direct impact on total expenses.

A change in any of the components of aggregate demand, be it consumer spending, capital investment, government spending, net exports(the latter is within open economy) will entail multiplier effects, leading to a corresponding change in income.

Rice. 48.1. - The impact of government spending and taxation on the equilibrium level of income

An increase in government spending and/or a decrease in taxation shifts up line C + I + G + NX and leads to income growth up to level Y¢.

Reducing government spending and/or increasing taxation shifts down line C + I + G + NX and leads to a decrease in income to Y level."

So, if the government decided to increase government purchases by $20 billion (and this is being done at the expense of the budget), then the line C + I + G + NX will move higher, to position (C + I + G + NX).

For example, DG = 20 billion dollars; marginal propensity to consume (MPC) = 0.80; marginal propensity to save (MPS) = 0.20; the multiplier (k) under these conditions is 5.

The income increase will be: DY = DG x k = (20 x 5) = $100 billion.

It is very important to emphasize here that increased government spending is not financed by an influx of tax revenue.

The source of government spending in our example is budget deficit.

The authorities are deliberately taking this step, trying to increase aggregate demand and achieve full employment.

If the economy is "overheated" then the government can reduce the level of government spending.

The graph of total expenses will move down to the position (C + I + G + NX).