The state budget deficit is the amount by which its annual costs exceed revenues. This concept is closely related to the definition of "public debt" - the amount of state debt to foreign or its legal or physical representatives. In accordance with this, the debt can be external or internal.
The state budget deficit may be annually covered by an increase in public debt. In addition, there is a monetary issue. It should be noted that even a deficit-free budget in the state does not indicate a healthy economy. This applies, in particular, to the case when a country has significant debt.
There are various types of budget deficits. The main ones should be called the following:
- Cyclical.
- Structural.
- Operating.
- Primary.
- Quasi-fiscal.
The cyclical deficit of the state budget is the result of the actions of built-in economic stabilizers. A "built-in" (automatic) stabilizer is a special mechanism of the economy, with the help of which it becomes possible to reduce the amplitude in cyclical fluctuations in output and employment levels. At the same time, frequent changes in the economic direction are not carried out. Such stabilizers in industrialized countries are taxation systems, government transfers (including unemployment insurance), as well as a profit sharing system. Automatic mechanisms to some extent mitigate the problem of protracted time lags in discretionary fiscal policy. This is ensured mainly due to the fact that the stabilizers begin to function independently, without government intervention.
As part of the discretionary fiscal policy , special decisions are made by the government to stimulate general (aggregate) demand while reducing economic activity. These decisions are focused on increasing output and employment. In the process of their implementation, due to the fact that some types of budget expenditures increase (for example, financing of programs related to the creation of new jobs is carried out) or some taxes are reduced, a deliberate lack of finance in the country is created. Along with this, during the recovery, a targeted surplus of funds is created to contain inflationary conditions.
Discretionary government policy is associated with significant internal lags over time, since changes in the structure of costs or tax rates imply a lengthy discussion at the parliamentary level.
In the framework of non-discretionary fiscal policy, the state budget deficit, as well as its surplus, is formed automatically. This is influenced by built-in economic stabilizers.
The formation of effective structures of employment insurance and taxation of a progressive nature is considered the priority task set by countries with transitional economies. In these conditions, the objective difficulties of the stabilization policy exist along with the lack of optimal monetary, tax and other mechanisms for regulating the macroeconomic state.
The level of "built-in economic stability" is directly dependent on indicators of cyclical budget deficits. They are automatic “shock absorbers” of fluctuations in the total (aggregate) demand. It arises due to the fact that some types of budget revenues (tax revenues, in particular) increase (decrease) simultaneously with a decrease (increase) in transfers against the background of a decline (rise) in entrepreneurial activity.