Quite often we hear such a thing as “balanced budget”, but not everyone knows what it is. In this article you will find answers to many of your questions related to this term.
As you know, the budget consists of two parts, which are interconnected - income and expenditure. When they are equal, expenditure commitments do not exceed revenues, the budget can be called balanced. In this case, income includes the volume of all funds assumed for a certain period of time, including borrowing from other states, associations, etc.
A balanced budget is the key to the prosperity of the country as a whole and of each individual in particular. The slightest imbalance can lead to a number of negative consequences: interruptions in the financing of public institutions, problems with the repayment of foreign debts, arrears in payments in the national economy, a decline in the national currency, disruption of municipal and state orders, and much more.
If, when drawing up the budget, the revenue part was allowed to exceed the estimated costs, then this is considered to be with a surplus. At first glance it may seem that this is a positive phenomenon. But in fact, adhering to this concept, the efficiency of using budget funds decreases, as a result of which the burden on the economy increases, putting pressure on the business, slowing its development or leading to bankruptcy. Excessive mobilization of the revenue side often leads to negative consequences.
If in the process of budgeting the expenditure obligations exceed the estimated amount of income, then it is considered to be a deficit. This mainly occurs when the development of the country's economy lags significantly behind the needs and requirements of society. As a consequence, the state begins to experience an economic recession. Due to the release of unsecured money, inflation increases. The methods that are quite popular nowadays, which allow to balance the budget (raising taxes, utility bills, etc.), lead to the fact that a significant part of business goes into the shadows, increasing shadow capital. With regard to the social side of the adoption of the budget deficit, the costs of health care and social welfare of citizens are significantly reduced, payments to education and programs to combat unemployment are reduced. The general standard of living of the population falls.
The balance of the budget depending on the time frame may be short-term (1 year), medium-term (period from 3 to 5 years) or long-term (perspective for a decade). Such a division helps to monitor and draw appropriate conclusions about the effectiveness of government robots.
In order to balance the budget, all levels of government should be involved in its development. The main methods used in the preparation of the budget can be divided into two groups. The first - the balance of the budget is achieved during its formation. That is, the targeted limited flow of funds to those sectors where they are most needed, adequate, clear distribution of funds between budgets of all levels, balanced budgets at different levels, tough savings. Search for new sources of income, reducing the volume of the public sector, in extreme cases, budget borrowing. All this must be calculated and spelled out before the budget is approved and enters into force.
The second group is the methods resorted to in the budget execution process. These include strict adherence to the limits approved in the budget, a clear definition of the dates for the expenditure part, the current mechanism by which expenses can be blocked.