Cyclic budget deficit

The deficit of the state budget is the amount by which its annual costs exceed revenues. This concept is closely related to the definition of "public debt" - the sum of the state's debt to foreign or its legal or physical representatives. In accordance with this, the debt can be external or internal.

The deficit of the state budget can be covered annually by increasing the national debt. In addition, there is a money issue. It should be noted that even a non-deficit budget in the state does not indicate a healthy economy. This applies, in particular, to the case when the country has a significant debt.

There are different types of budget deficit. The main ones are the following:

1. Cyclical.
2. Structural.
3. Operating.
4. Primary.
5. Quasi-fiscal.

The cyclical deficit of the state budget is the result of the actions of embedded economic stabilizers. A "built-in" (automatic) stabilizer is a special mechanism of the economy, by means of which it becomes possible to reduce the amplitude in cyclical fluctuations in output and employment levels. At the same time, there are frequent changes in the economic direction. Such stabilizers in the industrially developed countries are taxation systems, government transfers (unemployment insurance including), as well as a system of participation in profits. Automatic mechanisms to some extent mitigate the problem of protracted lags in discretionary fiscal policy. This is mainly due to the fact that the stabilizers begin to function independently, without government intervention.

Within the framework of discretionary fiscal policy , special decisions are made by the government to stimulate general (aggregate) demand during the decline in economic activity. These decisions are aimed at increasing the level of output and employment. In the process of their implementation, due to the fact that some types of budget expenditures are increasing (for example, financing programs related to the creation of new jobs) or some taxes are being reduced, a purposeful lack of finance in the country is created. At the same time, during the recovery, a purposeful surplus of funds is created to contain inflationary prerequisites.

Discretionary government policy is associated with significant internal lags over time, as changes in the structure of costs or tax rates imply a lengthy discussion at the parliamentary level.

Within the framework of non-discretionary fiscal policy, the deficit of the state budget, like its surplus, is formed automatically. This is affected by built-in economic stabilizers.

The formation of effective structures of employment insurance and progressive taxation is considered a priority task, which is set by countries with a transitional form of the economy. In these conditions, the objective difficulties of stabilization policy exist along with the absence of optimal monetary, fiscal and other mechanisms for regulating the macroeconomic state.

The level of "built-in economic stability" is directly dependent on the indicators of cyclical budget deficits. They are automatic "shock absorbers" of fluctuations in total (aggregate) demand. It arises due to the fact that some types of budget revenues (tax revenues in particular) increase (decrease) along with the reduction (increase) of transfers against the backdrop of a decline (rise) in entrepreneurial activity.