Budget sequestration - what is it?

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:48

Reconciliation of debit with credit is an issue that worries not only individuals and entrepreneurs, but entire countries. It is one thing to make a budget for the year, it is quite another to execute it. The state, of course, can turn to international lending, but this is far from always profitable. In this case, there is a budget sequestration. This procedure is legally established in the United States and some countries, but in most they try not to voice this name, presenting cost reduction as a necessary, but not mandatory measure.

Budget sequestration: what is it?

US law provides for a procedure that limits government spending to clearly defined categories. This is budget sequestration. Congress adopts the size of the annual appropriations. If the costs exceed the established, then there is a simultaneous and proportional reduction in all categories. This amount is not transferred to the indicated areas, but is left in the Treasury. The very term "budget sequestration" is taken from legal sciences. In legal sciences, it means the transfer of property to bailiffs in order toprevent damage to him until the dispute is considered in court.

The Gramm-Rudman-Hollings Act and Modernity

The term "budget sequestration" was first used in a 1985 US law. An entire section of the Deficit Reduction Act, drawn up by Gramm, Rudman, and Hollings, was dedicated to him. But already in 1990, it was decided to abandon the strict restrictions. The new system lasted 12 years. Then for a long time sequestration was the subject of expert discussion. 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 limit of debts. A Debt Reduction Committee was formed. Sequestration of budget expenditures is the last measure that can be applied in the event that Congress fails to pass a bill to reduce spending. Many experts spoke about budget sequestration in 2013. To the delight of taxpayers, the government managed to avoid this.

The budget process in Russia

Every year the government forms a federal law that shows how the population of the country will live. Then the budget is signed by the President and comes into force. The financial year in this case completely coincides with the calendar year. The main components of the budget are income, expenses and their difference. There is a deficit in the Russian Federation, that is, the government's costs are not covered by tax and other revenues. If a50 billion is income, and expenses are 150, which means that the country needs to find those insufficient 100 somewhere. The deficit is a balancing item. You can put any amount there, but this will not bring additional money to the state. If there are no resources to finance certain projects, then this is simply a deception of the population. Moreover, this state of affairs creates a precedent for the uncontrolled disposal of funds: one article can be reduced by 10%, another by 50%, and a third can be completely removed. And how can we say in this case that the budget is executed? However, 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 later they will have to be paid back with interest, but here the current crisis situation comes to the fore, and not dreams of good prospects. The sources of deficit coverage include borrowings from individuals and legal entities, as well as international organizations and other states. The problem with the latter is that their loans are often accompanied by political influence on the internal situation in a country with a shortage of funds.

In addition, the state can issue bonds that are bought by individuals and legal entities. But it is important to understand that sooner or later the money will have to be given back, so budget expenditures should not be associated with populist slogans, but with really promising industries with great returns.

Functional classification

ForIn order not to have to sequester the budget in the future, it is important from the very beginning to correctly establish spending on certain sectors. The functional characteristic shows where the money is spent. For example, it can be used to find out how much money was spent on the implementation of management, defense, he alth care and education. At the same time, this characteristic is the same for all subjects of the Russian Federation. Further, all expenses and incomes are summarized in the consolidated budget. In its most general form, it consists of three parts: the maintenance of ministries and other administrative bodies, interaction with the territories, and the implementation of certain development programs. As for transfers, they have no target orientation. The total expenses for the subject of the federation are considered according to the norms. This means that a higher price coefficient may apply to some regions (for example, North).

Sequestration of the 2014 budget

The consequence of the constant deficit is the growing need to reduce spending and find new ways to finance it. At the end of 2013, the Minister of Finance of the Russian Federation announced the need to reduce budget allocations. He stressed that sequestration of the budget for 2014 is not provided. Anton Siluanov assured that this is not a cost cut, but a choice of priorities that meet the requirements of the time. An increase in the deficit of 400 billion rubles does not allow allocating funds for the development of Transbaikalia and the Far East, as well as the development of the infrastructure necessary for the World Cup, which will be heldafter 4 years in the Russian Federation. Therefore, according to the minister, it is necessary to change priorities and direct money to more promising industries. For 2014, revenues are planned at 13.4 trillion.

However, the new budget has caused a lot of criticism. Most refer to the redistribution of funds as sequestration. Experts believe that a much better move is always to expand the revenue side, rather than closely control spending.