Glamor Economics

Chapter 94

Chapter 13 Section 4 Financial Leverages to Achieve National Goals - Fiscal Policy

After World War II, in order to enhance the political and economic status of European countries, the European Union decided to implement a unified currency - the euro.The euro is the result of the most significant monetary reform in Europe since the Roman Empire.

The introduction of the euro not only improves the European single market, but also facilitates free trade among countries in the euro zone, which has become an important part of the EU integration process.Of course, the introduction of the euro requires corresponding fiscal policies to support it.Before the introduction of the euro, the European Union passed the "European Economic and Monetary Union Treaty" (also known as the "May Treaty") in December 1991, requiring that the government fiscal deficit of countries joining the euro zone should not exceed 12% of GDP, and government debt should not exceed 3% of GDP. The balance cannot exceed 60% of GDP. In 2003, McCaw, who was the deputy finance minister of Germany at the time?Weiser once said during his visit to China: "These two figures were not conjured by magic, nor can it be said that there is any scientific calculation method. These two figures are the result of long-term discussions." After discussions and consultations with relevant countries , the EU finally decided to adopt the two fiscal convergence standards of 3% and 60%.

Why do EU countries adopt certain fiscal policies to support the euro?Because fiscal policy can adjust the aggregate demand for money.The clear meaning of fiscal policy in finance refers to the guiding principles of fiscal work stipulated by the state according to the tasks of political, economic, and social development in a certain period of time. For example, increasing government expenditure can stimulate aggregate demand, thereby increasing national income, and vice versa. aggregate demand, thereby reducing national income.Taxation is a contractionary force on national income. Therefore, increasing government taxation can suppress aggregate demand and reduce national income, and vice versa, stimulate aggregate demand and increase national income.

The main means of fiscal policy are as follows:

1.state budget.Fiscal policy goals are achieved mainly through the determination of the scale and balance of budget revenue and expenditure, and the arrangement and adjustment of revenue and expenditure structure.

2.tax.Mainly determine and guarantee the national fiscal revenue through tax types and tax rates, adjust the social and economic distribution relationship, meet the financial needs of the country to perform political and economic functions, and promote stable and coordinated economic development and social fair distribution.

3.financial investment.Consolidate and expand the economic base and adjust the industrial structure through the national budget allocation and guide the flow and flow of extra-budgetary funds.

4.Financial subsidy.According to the objective requirements of the law of economic development and the policy needs of a certain period of time, the state directly or indirectly provides financial subsidies to farmers, enterprises, employees and urban residents in the form of financial transfers, so as to achieve the goal of stable and coordinated economic development and social stability. .

5.financial credit.It is a redistribution method for the state to raise and use financial funds according to the principle of compensation, including issuing public bonds and special bonds at home, issuing government bonds abroad, borrowing from foreign governments or international financial organizations, and implementing paid use of turnover funds in the budget and other forms.

6.Fiscal legislation and enforcement.It means that the country legally recognizes fiscal policies through legislation, and resorts to judicial organs to try and punish various violations of fiscal regulations (such as tax evasion and tax resistance in violation of tax laws, etc.) in accordance with the provisions of the law, so as to ensure fiscal policies. achievement of goals.

7.financial monitoring.It is an important administrative means to achieve fiscal policy goals.That is, the state inspects and supervises the implementation of fiscal policy and fiscal discipline by state-owned enterprises, public institutions, state agencies and their staff through the financial department.

Different fiscal policies are adopted in different periods. According to the tasks of economic construction and changes in the world economic environment, our country also adopts corresponding fiscal policies in different periods:
From 1993 to 1997, in response to economic overheating and inflation, a moderately tight fiscal policy was implemented, combined with a moderately tight monetary policy, to promote the successful realization of a "soft landing" of the national economy and the formation of a "high growth rate". , low inflation" good situation.

In 1998, due to the impact of the Asian financial crisis, the problems of insufficient effective demand and obvious deflation trend appeared in my country.Under such circumstances, the Chinese government decisively decided to implement a proactive fiscal policy, which not only effectively resisted the impact of the Asian financial crisis, but also promoted economic restructuring and sustained rapid growth.

Since 2004, my country's economy has begun to step out of the shadow of deflation and has shown a trend of accelerated development. However, there have been problems such as excessive investment growth in some industries and regions, and inflationary pressure has continued to increase.In this case, from 2005 onwards, the active fiscal policy turned to a prudent fiscal policy.

Before the financial crisis in 2008, the important task of my country's macro-control was to promote stable and rapid economic development, prevent economic growth from overheating, and prevent prices from structural growth to obvious inflation.At the same time, efforts will be made to optimize the economic structure and improve the quality of economic growth.Therefore, our fiscal policy adopts "some maintenance and some pressure", implements a prudent fiscal policy, controls fiscal expenditures, and thus promotes a coordinated and healthy economic development.

After the financial crisis, in order to cope with the international financial crisis and maintain a stable and rapid economic development, major adjustments were made to the fiscal policy from November 2008, and a proactive fiscal policy was implemented.This is another turn to implementing a proactive fiscal policy after the Asian economic crisis in 11.

[links to related words]

Expansionary fiscal policy (also known as active fiscal policy) refers to increasing and stimulating the aggregate demand of the society through fiscal distribution activities.

Contractionary fiscal policy (also known as prudent fiscal policy) refers to reducing and restraining aggregate demand through fiscal allocation activities.

Neutral fiscal policy refers to the fact that fiscal distribution activities have a neutral impact on social aggregate demand.

Automatically stable fiscal policy means that there is an inherent financial system that can automatically adjust the economic operation mechanism with the development of the economy and society without the government taking other interventions.

Fiscal policy with discretionary decision-making means that the government actively and flexibly chooses different types of anti-economic cycle fiscal policy tools according to the economic and social conditions in a certain period of time, intervenes in economic operation behavior, and achieves fiscal policy goals.

(End of this chapter)