What is the impact of a fiscal deficit on a country?

One minute to tell you the 12th day of the problem of cheating the teacher! The assistant always looked for difficulties and focuses, and this time he even asked: How much impact does the fiscal deficit have on the people? I'll try to talk about it, everyone is correcting and adding!

1. Debt accumulation: The fiscal deficit needs to be made up by borrowing or issuing treasury bonds, which will make the debt accumulate. If debt levels are too high for a long time, it can increase repayment pressure and affect the country's creditworthiness.

2. Fiscal instability: Persistent fiscal deficits can lead to fiscal instability, which may lead to economic problems such as inflation or currency depreciation. This could undermine the country's economic stability and development.

3. Difficulty in resource allocation: The fiscal deficit limits the available funds, which may lead to insufficient or unreasonable resource allocation. Public services, infrastructure, education, health care and other aspects may be affected in certain areas, thereby reducing the level of social welfare.

4. Increase the burden of debt: The fiscal deficit means that you need to return and pay more interest and principal, which will increase the burden on taxpayers in the future. A long-term fiscal deficit could leave a heavy debt burden for future generations.

5. Economic imbalances: Economic imbalances can occur when fiscal deficits are used primarily for consumer spending rather than productivity-enhancing investment. This could undermine a country's competitiveness and long-term sustainable development capacity.

It is important to note that a modest fiscal deficit is acceptable in some cases and can be used to respond to fluctuations in the economic cycle and promote economic growth through effective fiscal policy. However, excessive fiscal deficits could bring about the potential harms described above.

China's fiscal deficit began in 1979, when the reform and opening up began, when the deficit was relatively small. Since the implementation of the proactive fiscal policy in 1998, the scale of the fiscal deficit has increased sharply, from about 60 billion yuan per year from 1994 to 1997 to 146 billion yuan in 1998, 180.3 billion yuan in 1999, 253.3 billion yuan in 2000, 259.8 billion yuan in 2001, and 309.8 billion yuan in 2002 (budget). The fiscal deficit as a percentage of GDP is close to the international warning threshold of 3%.

According to the general logic, fiscal revenue and expenditure are a comprehensive indicator of economic development, and the economic improvement should lead to an improvement in the fiscal situation. However, as of 1997, China's finances have been in deficit for nearly 20 consecutive years since the reform, and it is still unknown when the deficit will be eliminated. On the one hand, this is the result of the effects of old problems and certain new mistakes, and on the other hand, it is a factor that has to be delayed in the course of institutional changes, economic adjustment and development.

So, we can't simply link the fiscal deficit to poor economic conditions.

After 1980, it is undeniable that the negative impact of the annual deficit in the budget is undeniable, and it has directly or indirectly led to the softening of budget constraints, excessive functions, low economic efficiency, inflation, and hindering the stable and coordinated development of the economy. Generally speaking, however, the fiscal deficit has played a tremendous positive role in maintaining sustained and stable growth of the national economy. If this is not the case, it will be difficult to introduce a series of concrete reform measures and measures for economic adjustment, stability, and development.

For example, since 1998, the implementation of the active fiscal policy is to expand the scale of expenditure with a deficit, first of all, the vast majority of China's deficit expenditure is used to provide infrastructure investment for the production and operation activities of the private sector, which is different from the general situation in most countries. Second, China's current economic turmoil is at a low point, and the cyclical deficit caused by the economic recession will not crowd out private investment, but will help stimulate private investment, stimulate domestic demand, and enable the economy to recover as soon as possible.