The US state budget can be considered the most accurate financial expression of the essence and nature of the state structure and power. As in all developed countries, the US budget performs three main functions. Historically, the oldest is the content of the state machine: the administrative apparatus, the army, the courts, etc. ; the second arose at the turn of the XIX – XX centuries. – ᴨ the redistribution of income between the social strata of the population and the territories in order to ensure a favorable social climate, to prevent possible hotbeds of tension. The third function, developed after the crisis of the 1930s, is to use the budget as a tool to stimulate economic growth and maintain the conditions for the development of entrepreneurship. The US experience shows that with a successfully “working” economy, the state should not and can not be a force that opposes the private sector. It fulfills the role of a natural and stable partner in economic affairs and the guardian of all economic structures.
The federal structure of the United States stipulates a very important feature of the budgetary-tax process: a clear interaction of the three systems – state revenues, public spending and intergovernmental fiscal relations (“fiscal federalism”). The system of public expenditures includes the preparation of the draft budget, its revision in the executive bodies (“dilapidation”), approval in Congress and monitoring of implementation. The system of state revenues is a set of taxes and non-tax payments existing in the state and ensuring its expenses, mechanisms for collecting and controlling revenues, as well as legislative support for budget revenues.
The budget implies the availability of revenue and expenditure parts. The world theory and practice followed by the United States is based on the “initial establishment of justified expenditure needs of the state with the subsequent determination of the amount of revenue and the order of their collection. Any changes in the expenditure policy should immediately be linked to the tax policy and vice versa. Budget deficits are allowed (ideally) for a short time and on condition that they are later compensated as a result of a more successful functioning of the economy and increased budget revenues.
The most important and most complicated task is the creation and maintenance of a system of fiscal federalism. In the US, the solution to the problem of fiscal federalism is based primarily on the availability of own sources of income for each level of government, as well as for “help from above,” which covers all states and local governments.
The US federal budget is part of the overall mechanism for the adoption and implementation of economic decisions at the highest level. Unlike the other most significant part of this mechanism – the monetary system – the budget is a more flexible and mobile tool entirely at the disposal of the state.
A fundamental feature of the fiscal policy and the US budget system is their inextricable link with the state of the economy and the economic policy of the state. Development and adoption of decisions on holding any important economic events in any field are simply impossible without their linkage to the country’s budget policy. And vice versa – all US budgetary activities are developed and conducted in line with the general economic state strategy.
Structure of expenditures and revenues of the US budget.
Despite the desire of various forces to reduce the scale of federal social programs, in general, their importance is not reduced. On the contrary, in recent years, military spending has decreased significantly – their share in the country’s GDP fell from 6.4% under Reagan to about 3.2% in 1999. The increase in the share of civilian expenditures is due to a number of reasons and opportunities, including the end of the Cold War. Among the main items of federal budget expenditures, in addition to national defense, there are also expenditures on education, medicine, energy, agriculture, science, etc. Social insurance programs are separated: they are consolidated into the federal budget, but are financed through independent “trust funds”. The funds of these funds, obtained with the help of special taxes, can be spent only for the purposes for which they are collected. Social security programs account for about 35% of all federal budget expenditures.
In addition to taxes on social insurance, at the federal level there are several other types of taxes. The main, “core” – tax on individual incomes (up to 47% of total federal revenues, this is possible, of course, only due to the high share of the national wage fund in GDP – in the USA it is about 60%). Together with the corporate income tax, it gives up to 57% of all federal revenues. Relatively small revenues – from customs duties, excises, inheritance taxes and donations. However, each of them is considered an important element of ensuring financial discipline and effective control. For the same reason, a corporate income tax is very important, from which the federal budget receives 9-11% of total revenues.
For 75 years of the formation of the regular budget at the federal level, 57 times it was reduced to a negative balance. The deficit problem has become “the No. 1 problem” for US domestic policy. After 30 “deficit” years, during which various laws were developed and adopted to combat the scarce basis for designing and financing public spending, in fiscal year 1998 the federal budget was reduced to a surplus of 69.2 billion dollars.