A surplus budget is Definition, causes. What is a surplus?

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:45

It is believed that a budget surplus is good for the state. So or is it? To answer this question, you need to know the definition. So what is a surplus? More on that later.

What is a surplus?

Let's start with a definition. A budget surplus is a positive balance sheet. In other words, income exceeds expenses. There is also the concept of "primary" surplus and "secondary". Almost all states are in debt. As a rule, these are obligations under federal loan bonds. The “primary” budget surplus is the figure without taking into account the cost of servicing the public debt. For example, after all expenditures on obligations, about $1 trillion remained in the budget. Payments on obligations of federal loan bonds - 0.1 trillion dollars. Therefore, 0.9 trillion is a “secondary” surplus. Let's define it.

A "secondary" budget surplus is the balance after all government liabilities have been deducted. Significant indicators are the ratios to GDP. Gross domestic product is a macroeconomic indicator that is shownlevel of production in the country. Without it, there is no point in analyzing the surplus. For example, there is about $1 billion left in the budget. How to determine - a lot or a little? To do this, you need to compare it with GDP as a percentage. For example, for the year, GDP amounted to 1 trillion dollars. The surplus in this case will be equal to 0.1%.

Types of budgets

What does a surplus, deficit, balanced budget mean? Let's look at the types. Roughly, budgets are divided into three types:

1. Surplus – we have already defined it. Income exceeds expenses.
2. Balanced - income and expenses are equal.
3. Deficit - spending more than income.

Hope this is clear. Knowing the essence of these concepts, you can answer which budget is better: a deficit or a surplus? At first glance, it seems that the second. We agree that it is better when money remains than when there is not enough money. But is this true for the state budget? Let's look further.

A surplus is a plus?

You can't think that extra money in the budget is good. Actually it is not. It is better for the economy when the government budget has a small deficit but finds borrowed money to cover it than a huge surplus. Why is that?

The fact is that the economy needs free funds, money. Growth is impossible without investment. When money ends up in the budget, and even more so in various accumulative funds, this is notpragmatic policy, because the money does not go to development. This is tantamount to a person putting a million under his pillow instead of investing it in a profitable business and receiving twice as much annually.

It was the accumulative policy of former Finance Minister Kudrin that formed several reserve funds in Russia. Of course, the media claims that this is good. When there were super profits from the high price of hydrocarbons, we were able to save up the money that we used during the crisis.

However, many economists do not think so. They argue that instead of saving money in funds, they could be invested in various projects. This would allow us to diversify the economy and get off the "oil needle". Ex-Minister Kudrin himself spoke quite unambiguously on this issue. He believed that the money would simply be stolen and as a result there would be nothing. Therefore, it is better to keep them than to give them into the pockets of officials.

Where does the surplus come from? Let's analyze the causes of the state budget surplus.

Reasons

The nature of the appearance of windfall profits is simple: our country depends on the export of raw materials. They make up about half of government revenues. In Russia, spending is planned based on today's oil prices. At the beginning of 2017, a barrel of black gold on world markets gives about $50. The government lays this price for the future, knowing the volumes of production and sales. If aexport volumes will remain the same, and the price on world markets will jump sharply, say, to $100 per barrel, then our country will get a huge surplus. It is no coincidence that the most significant indicators in relation to GDP were oil-exporting countries: Kuwait (22.7% in 2010), Norway (10.5% in 2010).

The most balanced budget is observed in developed countries, whose income does not depend on the export of raw materials: Germany, Luxembourg, Denmark.

Structure of income and expenses

Total budget revenues are divided into two categories:

1. Tax.
2. Non-tax.

Tax subdivided into:

• income tax;
• on property;
• state fee;
• excise duty;
• taxes on total income;
• for goods and services sold in the country.

Non-tax income:

• from foreign economic activity;
• profit from public-private partnership;
• payments when using natural resources;
• fines, sanctions;
• income from the provision of various services;
• confiscation of property;
• refund of unclaimed subsidies, etc.

In addition to the above items of income, a surplus can be created by various gratuitous receipts from people, other states, supranational entities, public organizations.

Government spending goes to:

• defense, security, law enforcement, including the judiciary;
• education and science;
• medicine;
• housing and communal services;
• innovation;
• environmental protection;
• culture and sports;
• media;
• social sphere;
• interstate transfers.

Conclusions

So, a budget surplus is a surplus balance. Do not think that this is good for the country. All free funds should be directed to the development of the economy. In our country, this is most relevant, since there are two serious problems:

1. High corruption.
2. Dependence on hydrocarbon exports.

High oil prices on world markets lead to a budget surplus. However, investing this money in diversification is extremely inefficient due to high corruption. Low energy prices lead to budget deficits. This has a negative impact on public sector employees, pensioners, and vulnerable segments of the population. We hope that this vicious circle in our country will someday break.