Supporting the economy through public expenditures

• Author: Ramona Ciobanu
• Position: Department of Public Law, <I>Transilvania</I> University of Bra&#x015f;ov.
• Pages: 191-198

Page 191

1. Introduction

The concern for collecting public revenues is explained by the need of the state to fulfill its functions and duties, which requires public expenditures. Sums from the state budget are assigned to military expenses, the state apparatus, public debts, subsidies and support for the business environment, covering social and economic needs, as well as to research and development. The size of public expenditures varies from one country to another and from one period or another, the whole budget procedure being guided by the principle of budgetary balance.

2. The System of Public Expenditures

The exertion of state functions internally and externally is made through a complex system of institutions and bodies, such as the army, the police, the justice department, the administrative apparatus, the school system and the medical system. In order to support them, the state spends each year important amounts of money. Public expenditures tend to increase constantly, determined by military, social, political and economic factors. Some of these cause long-term effects, some affect the entire social and economic life, others only certain sectors. Usually, several factors act at the same time, either the same way or in different directions. Of these factors one can mention:

- population growth, diversified and increased need for social security as a result of a period of economic crisis

- the need to ensure the safety of the population which can lead to an increased police apparatus and equipping it with modern means of action,

- the extension of the public network of education, health, culture, social security institutions, and also the development of the state economy,

- the need to support the private economic sector, offering subsidies to stimulate production or export,

- the need to invest in the infrastructure and thus to build roads, bridges andPage 192airfields, to modernize means of road, air, train, sea transportation, to systematize the territory and protect the environment,

- the increase of military troops, perfecting the fighting techniques, the need to observe international military treaties, - inflation.

The evolution of public expenditures is influenced by the modification in the purchasing power of the national currency Monetary devaluation, following inflation processes, attracts price growths, a nominal increase in expenses carried out by the state while buying determined quantities of goods and services. On the contrary, in the case of price reductions following circumstantial factors, the state will pay a lower amount of money for the same quantity of goods. The actual size of public expenditures is influenced no doubt by monetary mutations. In order to have a clear understanding of actual public expenditure increases, it is necessary for their evolution to be analyzed according to that of the gross domestic product. The share of public expenditures in the GDP reflects the mutations that have occurred in distributing the GDP, in a specified interval, through the state. Collecting budget revenue must not over increase the fiscal pressure, otherwise one may find that the tax range, or the business figure in the case of economic agents, may constantly decrease and labor, entrepreneurship and investments are no longer stimulated. The effect obtained - a downsize in budget revenues - will be contrary to the one intended, so the growing budget expenditures will not be supported.

The field literature [1] explains the role and importance of public expenditures, classifying them by several criteria: administrative, economic, by destination, by their permanent or incidental character etc. In the budget practice [3], expenditures are synthesized as:

Current expenditures

I. Staff expenditures;

2. Expenditures on goods and services;

3. Interests;

4. Subsidies;

5. Back-up funds;

6. Transfers between units of public administration;

7. Other transfers;

8. Projects involving post adhesion non-reimbursable funds;

9. Social security;

10. Other expenditures;

11. Expenditures related to reimbursable financing programs; Capital expenditures

    XII. Non-financial assets;

13. Financial assets;

14. The national development fund. Financial operations;

15. Loans;

16. Credit reimbursing.

    We may synthesize that, in order to exert its functions, the state carries out the following expenditures:

    ● public expenditures for social purposes;

    ● public expenditures on research and development;

    ● military expenditures;

    ● expenditures on the functioning of the state apparatus;

    ● economic public expenditures;

    ● other expenditures.

    Directly or indirectly, all public expenditures have effects on the economy. Thus, expenditures on the functioning of the state apparatus are very important in the carrying out of activities in all domains, including in the economy. This way the adoption and application of laws is ensured, and also the judicial activity, the order and safety of citizens, the diplomatic activity, the collection of taxes, the protection of the environment, the consumer and competition protection etc. Economic growth implies political, social, legislative, diplomatic stability. These expenditures therefore create the basis for a competitive economic activity.Page 193

    Military expenditures (maintenance, acquisitions of combat techniques, participating in international military actions etc) considered by financiers to be unproductive and wasteful, also have an impact on the economy. It has to be said though, that military protection is a special commodity, with a sale area which is different from that of ordinary commodities. This commodity is sold to the state (internally) and to governments of other states (externally). By having an own market, military products are a safe investment and a special status concerning the contracting of the sub-suppliers, numerous small and medium companies.

    In the category of public expenditures on social purposes there are also social security expenditures, education, culture and health expenditures. Expenditures directed towards social security target pensions, social aids and allowances (like unemployment aid, grants for students, professional qualification aids, single parent family aids, children allowances or...