The way to solve the fiscal deficit and how to solve the government fiscal deficit

Tax increases. Additional banknotes.

Borrowing: domestic and external.

How to deal with fiscal deficits at the end of the year?

There are four ways to solve the fiscal deficit: improving management, debt restructuring, introducing investment, and splitting assets. Fiscal deficit refers to the situation that the annual expenditure is greater than the income, because the financial side is often marked in red when making statements, so it is called the fiscal deficit, so the principle of solving the deficit is to reduce expenditure and increase revenue.

The ways in which our country can make up for its fiscal deficit are:

1. Use the balance of previous years.

The use of the surplus of the previous year is to use the surplus formed by the excess of fiscal revenue over expenditure of the previous year to cover the fiscal deficit. In making use of the surplus of the previous year, the fiscal department must coordinate its relationship with the banks and do a good job in balancing the financial funds with the credit funds.

2. Increase tax revenue.

Increasing taxes includes creating new taxes, expanding the tax base, and raising tax rates. But it has considerable limitations and is not a stable and reliable way to cover fiscal deficits

First of all, due to the prescriptive nature of the tax law, it is determined that no matter which method is used to increase taxes, it must go through a series of legal procedures, which increases the time cost of increasing taxes and is difficult to solve.

Second, because the increase in taxes will inevitably increase the burden and reduce the economic benefits of taxpayers. Therefore, taxpayers are extremely sensitive to changes in tax increases and decreases, which makes the attempt to rely on tax increases to make up for the fiscal deficit often subject to great resistance, so that tax increases may not be decided.

Finally, the Laffer curve indicates that tax increases are limited and cannot be increased indefinitely, otherwise they will inevitably cause serious consequences to the national economy.

3. Additional issuance of currency.

The issuance of additional currency is one way to cover fiscal deficits, and it is still used in many developing countries today. However, in the long run, inflation depends to a large extent on the growth rate of money, and excessive currency issuance will inevitably cause inflation and will bring about vicious consequences. Therefore, it is only a stopgap measure to cover the fiscal deficit with additional monetary issues.

4. Issuance of public bonds.

It is a common practice in countries around the world to finance fiscal deficits through the issuance of public bonds. This is because, from the debtor's point of view, public debt is voluntary, repayable and flexible; From the creditor's point of view, public bonds are safe, profitable, and liquid.

The issuance of public bonds is beneficial to both the first and the subscribers, and it is also most acceptable to the public to make up for the fiscal deficit through the issuance of public bonds.

What are the ways to cover the fiscal deficit?

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1. Improve the budget management system.

1.Promote all-round budget management and establish a comprehensive, standardized, open and transparent budget system.

As the basic plan of fiscal revenue and expenditure, the financial budget stipulates the scope, direction and focus of fiscal revenue and expenditure work in the budget year, and the soundness of the budget management system is related to the efficiency of the use of financial funds. At present, there are problems in China's budget system, such as the lack of scientific budget preparation, the softening of budget constraints, and the imperfect budget supervision mechanism, which not only lead to the failure of financial funds to be spent on the "knife edge", but also easily breed corruption and affect the image of the country. The key to deepening the reform of the budget management system and establishing a comprehensive, standardized, open and transparent budget system lies in the implementation of full-caliber budget management, that is, all the best funds are included in the four major categories of budgets: public finance budget, public budget, social security budget, and state-owned assets operating budget, and all the top revenue and expenditure are put into the cage of the system, so as to strengthen the management and supervision of financial funds, pay attention to the rationality of financial funds, and improve the efficiency and transparency of the use of funds.

2.Change the focus of the budget review to focus on spending budgets and policies.

At present, China's budget review includes three aspects: revenue, expenditure, and balance of revenue and expenditure, and the balance of revenue and expenditure is the focus of budget review. When the economy is in a downturn, in order to control the deficit and complete the budget, the fiscal and taxation departments are not allowed to appropriately reduce fiscal revenues according to the economic situation, which undoubtedly makes the already sluggish economy "worse"; In the same way, when the economy is overheated, the fiscal and taxation departments must not curb the economic upsurge by appropriately increasing fiscal revenue. **The relative solidification of revenue and expenditure activities has brought about the "pro-cyclical" problem in policy implementation and hindered the realization of the macroeconomic regulation and control function of fiscal policy.

Therefore, the focus of budget examination and approval should be expanded from the balance state and the size of the deficit to the expenditure budget and policies, so that the fiscal revenue will change from a task to an expectation, which is conducive to the policy of "acting against the economic wind" and giving play to the function of macroeconomic regulation and control.

3.Establish a cross-year budget balance mechanism to ensure fiscal sustainability.

Although China's current annual budget balance mechanism can better ensure the realization of fiscal balance within the budget year, its disadvantages are also becoming increasingly prominent: first, this short-term behavior of fiscal revenue and expenditure makes it impossible for fiscal policy to effectively and flexibly respond to the economic cycle in a longer year; Second, if the focus of budget review is expanded to expenditure budgets and policies, the previous balance between revenue and expenditure will be broken, and fiscal deficits will become the norm in order to carry out macroeconomic regulation and control and ensure fiscal investment in the field of people's livelihood, which will make the annual budget balance mechanism increasingly unable to meet the requirements of the times. Therefore, it is necessary to change the annual budget balance mechanism to a cross-year budget balance mechanism to control fiscal revenue and expenditure and fiscal policy in the medium and long term.

The three ways to make up for the fiscal deficit are to increase taxes, reduce spending, and borrow. Each of them has advantages and disadvantages as follows:

1.Increase taxes.

Advantages: It can directly increase the income of the people, reduce the fiscal deficit, and maintain the operation and investment.

Disadvantages: It will increase the tax burden of individuals and businesses, which may lead to public disgust and affect the credibility and support.

2.Reduce government expenditures.

Advantages: It can reduce the expenditure of **, reduce the fiscal deficit, and reduce the burden on the public.

Cons: May reduce** investment and services in certain areas, leading to public dissatisfaction and social instability.

3.Loan. Advantages: A large amount of funds can be obtained in a short period of time to meet the capital needs of the first class.

Disadvantages: The need to pay additional interest and debt increases the financial burden and uncertainty of the future. It can also affect the country's credit rating and economic stability.

Therefore, the choice of which way to cover the fiscal deficit should be decided on a country-by-country and time-specific basis.