[Abstract] From the perspective of combining theory with practice, starting with customized analysis, this paper makes an all-round and multi-level investigation on fiscal balance and deficit, involving caliber, proportion, compensation methods, principles of fiscal balance and arrangement, etc. , and began to outline the relationship between fiscal balance and social total supply and demand balance, as well as the economic impact analysis of fiscal deficit, and finally concluded that fiscal deficit itself does not matter whether it is good or bad, under certain conditions, it can become a fiscal policy tool.

Fiscal balance and fiscal deficit

(A) the concept of fiscal balance and fiscal deficit

Fiscal balance means that fiscal revenue and total fiscal expenditure are equal. If they are roughly equal, they can be called basic equilibrium. Fiscal deficit refers to the difference between fiscal expenditure and fiscal revenue, which is expressed in red letters in accounting, so it is called fiscal deficit. Fiscal balance and fiscal deficit are usually calculated by fiscal year, and the fiscal year in China is the same as the calendar year.

There are generally three kinds of quantitative comparison between fiscal revenue and fiscal expenditure. First, the balance of payments, that is, fiscal balance; Second, income exceeds expenditure, that is, there is a fiscal balance; Third, expenditure exceeds income, resulting in a deficit. From the practical experience of China and other countries, these three situations may occur in budget preparation, but there is almost no situation in which the budget execution results are completely equal and identical, or the income exceeds the expenditure or the expenditure exceeds the income. So as long as the income and expenditure are almost the same, it can be regarded as a general financial balance.

Deficit and deficit budget

Fiscal deficit is a general term and can be divided into two different situations. One is that when budgeting, expenditure is greater than income, leaving a gap, which is a deficit arranged in advance in a planned way. This kind of budget is called deficit budget; The other is that the budget arrangement has no deficit or the deficit amount is very small, but in the process of budget implementation, due to one reason or another, income decreases or expenditure increases, resulting in an increase in deficit or deficit amount. This deficit in implementation is also called the final account deficit.

The budget is balanced and the final accounts show a deficit. Generally speaking, it is only caused by natural disasters or work mistakes in individual years. However, deficit budget is usually associated with deficit policy. Because of some needs, the government has planned the use direction of the deficit in advance in order to stimulate economic development and expand employment.

(3) Long-term balance and regular balance

Generally speaking, fiscal balance refers to the fiscal balance of the year. In recent decades, some economists have put forward the view of long-term equilibrium. They believe that financial operation is not isolated, but should be adapted to the economic cycle. Therefore, the pursuit of fiscal balance should not only focus on the current year, but also focus on long-term balance. For a period of time, some years have deficits and some years have surpluses. From the whole period, as long as the total amount is generally balanced, it can be considered as fiscal balance.

(D) The fiscal deficit has different caliber.

How to calculate the amount of fiscal deficit, different countries use different calibers, the most common are the following two calibers:

The first type: deficit (balance): (recurrent income+debt income)-(recurrent expenditure+investment expenditure+debt expenditure)

This formula can also be expressed as: deficit (balance) = (recurrent income-recurrent expenditure-investment expenditure)+(debt income-debt expenditure).

First of all, let's clarify the concept in the formula: recurrent income refers to the financial income obtained by the government through legal channels such as taxation; Recurrent expenditure is the expenditure arranged by the government to play its basic functions; Investment expenditure is directly related to the formation of fixed assets; Debt income includes bond income issued by the state at home and abroad and loan income from foreign countries or banks; Debt expenditure refers to the expenditure of repaying principal and interest. Obviously, the deficit represented by this formula is what China usually calls a "hard deficit", that is, the country has been unable to make up for the hard gap by borrowing.

The second type: deficit (balance) = recurrent income-recurrent expenditure-investment expenditure.

According to this calculation, if there is a fiscal deficit, it means that the government has spent a part of the funds outside the normal income, and this part of the funds is usually made up by government borrowing, which is what we call a "soft deficit."

The difference between these two calibers lies in whether the annual debt revenue and expenditure are included in the normal fiscal revenue and expenditure. Different countries deal with debt revenue and expenditure in different ways. Japan includes the national debt revenue into the national fiscal revenue, while most western countries such as the United States do not regard the national debt revenue as normal fiscal revenue. Before 1993, China used the first caliber to calculate the fiscal deficit. After 1993, the second standard has been adopted (but it is still different from the western standard in the treatment of interest payment).

(five) the central, local and national fiscal deficits and the proportion of deficits in GDP.

Most countries' budgets are prepared at different levels. The deficit of the central government budget is called the central deficit. The deficit in the local budget summarized by various places is called local deficit; The national fiscal deficit is the total national deficit after the sum of the central budget and the local budget and the sum of the two parts of the deficit (balance).

Generally speaking, there are many cases in which the central finance of each country has a deficit, and there are few cases in which the local finance has a deficit. This is because local governments have no power to issue money, and their ability to borrow money is also limited to some extent. Once there is a deficit, it should be made up by reducing expenditure or increasing taxes in the next few years. Like the United States, the federal government has been in deficit almost every year for more than a decade, while the state and local governments have basically a slight balance. According to the provisions of China's budget law, local governments cannot have deficits when preparing budgets, and local deficits are even less in actual operation.

The ratio of deficit to GDP is usually used to measure a country's fiscal deficit and its financial situation, and to make an annual or international comparison of fiscal deficit.

The ratio of deficit to GDP is to compare deficit with GDP, reflecting the extent of fiscal revenue and expenditure and the scope of fiscal stability. It is generally believed that the warning line of this indicator is 3%-5%.

(six) the principle of arranging financial revenue and expenditure

There are two different principles for preparing financial budget and arranging financial revenue and expenditure. One is "living within our means", that is, spending is arranged according to income ability, and "how much money can be done"; The other is "living within our means", that is, organizing income according to expenditure needs, "how much to do and how much to raise". For a long time, China has always regarded "living within our means" as the principle of fiscal revenue and expenditure arrangement. However, in practice, sometimes the necessary expenditure cannot be compressed into the income capacity, and there will still be a fiscal deficit. After the reform and opening up in China, there will be deficits in most years, which is the result of this helplessness.

Therefore, the understanding of "living within our means" and "living within our means" cannot be absolute. "Living within our means" is not to meet all the expenditure needs. The key is to reasonably determine the scope of government functions and comprehensively consider the local economic level and people's affordability when arranging expenditures. "Income" should be the income actively organized according to the needs of the government to perform its functions. Logically speaking, the first principle of government financial management in the scale of revenue and expenditure should be to design a comprehensive framework for raising financial resources on the premise of clarifying the reasonable functional scope and necessary expenditure tasks of the government, that is, "living within our means"; Then, on the level of daily financial operation and specific project implementation arrangements, we should do our best to "live within our means". In this way, living within our means and living within our means are the principles of unity of opposites and complementarity on two levels. Actively organizing income and reasonably arranging expenditure are actually interrelated and cannot be neglected.

Make up the fiscal deficit

(A) the main way to make up the fiscal deficit

From a global perspective, because countries are at different stages of economic development, different economic systems, different reasons for the formation of fiscal deficits and different calculation methods for deficits, countries have different ways to make up for fiscal deficits. To sum up, there are three main types: one is to make up for it with the financial balance of previous years; Second, make up for bank overdrafts or loans; Third, issue public bonds to make up the deficit with debt revenue and expenditure.

1. The fiscal balance in previous years made up for the deficit.

The so-called fiscal balance is not the balance of paper money, but the balance of corresponding materials. (1) Using the balance of the previous year to make up for the deficit of that year, as long as it is a real balance, it is the most reliable source of compensation. Using fiscal balance to make up the deficit will not affect the scale of bank credit and currency circulation, nor will it cause debt burden. However, judging from China's fiscal revenue and expenditure since the reform and opening up, from 1979 to now, there is actually only a slight balance of 1985. Therefore, it is impossible to make up the deficit by fiscal balance in practice.

(1) Selected Manuscripts of Chen Yun (1952- 1962, People's Publishing House, 1980), p. 46.

2. Financial overdraft or borrowing from banks to make up the deficit.

Bank financial overdraft refers to a way for finance to obtain funds from banks to make up the financial deficit; Financial borrowing from banks can be regarded as paid overdraft, that is, interest-bearing loans. In China, the effects of the two methods are essentially the same. This remedy method has three operation processes and results:

(1) If the bank advances financing by reducing the original loan methods or using the bank's deposit difference, this advance is based on materials, and the currency issuance can be kept within the scope of economic issuance, which will not affect the overall supply and demand balance of the whole macro economy.

(2) If the financial overdraft or loan to the bank exceeds the affordability of the bank, the excess will lead to the non-economic currency issuance of the bank, and this part of the "financial issuance" has no material guarantee, which will lead to the adverse consequences of the expansion of total demand.

(3) If the financial overdraft or loan to the bank, the bank simply can't afford it. At this time, it is completely compensated by issuing non-economic currency without material basis. This will lead to the non-economic growth of currency circulation, overdraw the purchasing power of society or borrow money from banks to make up for the deficit.

In the early 1990s, considering the development of banking business and the deepening of system reform, China has clearly stipulated that it is no longer allowed to make up the deficit by overdraft or borrowing from banks.

3. Issue bonds to make up the deficit

It is a common practice in modern countries to make up the fiscal deficit by issuing public bonds. Although the reasons for the formation of fiscal deficits in various countries are different from those for issuing bonds, most of the national debt issued by various countries is actually used to make up for the government fiscal deficit. In particular, the United States, Britain, Germany, Japan and other developed countries rely entirely on the issuance of domestic debt to make up for the deficit. Some developing countries, due to their weak economic base, large population, poor resources and low productivity, have limited ability to raise funds at home to make up the deficit, and also issue bonds abroad to make up the deficit. The use of public debt to make up the fiscal deficit is essentially the transfer of non-state-dominated social funds to state use in a certain period of time, and it is also the transfer of the right to use social funds and the adjustment of the use structure in a certain period of time. Making up the fiscal deficit by issuing bonds, as long as it is properly grasped, will generally not affect the normal development of the economy. This is mainly because:

(1) Issuing bonds only temporarily transfers the right to use part of social funds, so that the scattered purchasing power is concentrated in the hands of the government within a certain period of time, and the corresponding relationship between the currency in circulation and the available materials will not change. Therefore, moderate national debt will not lead to inflation.

(2) Subscribing for public bonds is usually voluntary, and the funds obtained by issuing public bonds are basically the free part of the social capital movement, that is, the funds temporarily suspended by society. These funds will be used in a centralized way for the time being, which will not adversely affect economic development.

However, public debt cannot be regarded as a means to make up the fiscal deficit that can be used indefinitely. When the fiscal deficit is long-term, persistent and massive, and the debt scale exceeds a reasonable range, it may lead to crisis consequences. Moreover, the idle funds of society are limited, and the excessive concentration of the state will often erode the necessary funds of economic entities, thus reducing the vitality and efficiency of social and economic life.

(B) Overview of China's fiscal deficit.

Before 1993, China's deficit was a hard gap (hard deficit) of recurrent income and debt income. When this deficit occurs, because the national debt revenue has entered the budget revenue, there are only two ways to make up the hard deficit. First, using the fiscal balance of the past year, judging from the actual situation in China, there is not much room for this method, because there is a deficit since 1979, and there is no balance to use. Another way is to overdraw or borrow money from banks, which can easily lead to inflation of "monetizing the deficit". For example, from 1979 to 1980, there was a relatively high deficit, and 1979 was1706.7 billion yuan and1270.5 billion yuan. 1980 The year-end balance of the financial overdraft to banks was170.2 billion yuan, which caused a great increase in currency circulation in that year and the following year, and the retail price index rose. The retail price index 1979~ 1980 * * rose by 8%. 1994, the state stipulated that the financial department would no longer borrow money from banks to make up the deficit, and the fiscal deficit would be made up entirely by national debt. At this point, the calculation caliber of China's fiscal "hard deficit" no longer exists, ending the way of financial overdraft or borrowing from banks to make up for the deficit. The fiscal deficit after 1994 was completely made up by issuing national debt.

Fiscal balance and total social supply and demand balance

The balance between total social supply and total demand is a necessary condition for the smooth operation of the national economy. It is a complex dynamic process, including material availability (effective supply) and social purchasing power (effective demand) in the national economy, structural adaptation and smooth circulation. The balance of total social supply and demand is the core issue of macroeconomic theory.

In the dynamic process of social and economic operation, the factors affecting the balance come from all aspects and are ever-changing. From a philosophical point of view, balance is only relative and temporary, and imbalance is absolute. Our task is to constantly find problems and solve contradictions in this complicated process, so as to achieve a relative balance.

Generally speaking, enterprises and residents can only arrange expenditures within their own income, even if they borrow, it is only a temporary transfer of income control. There are only two means to create purchasing power and influence demand, finance and finance. The revenue and expenditure of finance and credit are both monetary revenue and expenditure, which are the two "gates" for the circulation of money and the distribution of capital revenue and expenditure in the whole society.

In China, on the one hand, banks act as financial vaults, and financial deposits are one of the main sources of bank credit funds; On the other hand, banks pay profits or taxes to finance and buy bonds issued by finance. In the process of social reproduction, a considerable amount of funds are provided by both finance and banks. Whether there is a fiscal deficit or a credit imbalance, it will affect the changes in the total social supply. Therefore, the key to maintaining the balance of total supply and demand at the macro level lies in managing these two "gates". When China cancelled the channel of financial overdraft to banks, in fact, the fiscal deficit could not directly lead to the expansion of aggregate demand. But at this time, the fiscal deficit can still cause banks to issue too much money and expand demand through various indirect channels.

It should be noted that the policy of "slightly surplus in international payments" in 1950s was in line with the planned economy system implemented in China at that time. 1949 after the founding of People's Republic of China (PRC), in the specific international environment at that time, in order to quickly heal the wounds of war, restore the national economy and speed up the process of industrial construction, the state could only concentrate and use limited manpower, material resources and financial resources, and therefore implemented a highly centralized and unified economic management system. The economic operation of the whole society, from production and circulation to distribution and consumption, is directly controlled and regulated by the government's plan. In addition to the necessary consumption of workers, most of the national income is centrally and uniformly distributed by the finance for the needs of economic and social development. This system determines that finance has a decisive influence on the total balance of the national economy. By then, as long as the fiscal revenue and expenditure can be balanced, the total demand and supply of the whole society will have the basic conditions; And if the financial imbalance, it will soon lead to the imbalance between total social demand and total supply. Therefore, under the planned economy system at that time, it was not only reasonable but also necessary for finance to adhere to the policy of "balance of payments with a slight surplus".

Through the practice of economic reform and opening up in the past 20 years, compared with the old planned economy, China's economy has undergone major changes in many aspects:

(1) The way the government plans and regulates the economy has changed, the scope of mandatory planning has been very small, and the market mechanism is playing a more and more extensive role.

(2) As an independent economic entity, enterprises operate independently and compete with each other in economic operation. At present, the proportion of non-state-owned economic components in China's output value has exceeded that of state-owned economy, and state-owned enterprises are implementing strategic restructuring with the goal of establishing modern enterprise system and adjusting structure.

(3) Through the reform of the income distribution system of the national economy, personal income has increased substantially, and the proportion of personal consumption and savings of urban and rural residents in the national income has increased significantly, which has obviously affected the balance of the national economy.

(4) With the deepening of the banking system reform, under the control of the central bank, a relatively complete system of commercial banks and non-bank financial institutions has been formed. Credit funds play an important role in the national economy, and monetary policy has become a powerful lever to adjust the balance between total demand and total supply.

(5) The adjustment of the balance of payments to the national economy has been significantly enhanced. With the opening up, the proportion of China's total import and export trade in GNP has increased from less than 10% in 1978 to nearly 40%. In this case, the total amount of foreign capital actually utilized during 1979 ~ 1997 was nearly 350 billion dollars.

(6) With the improvement of marketization, the inevitable periodic fluctuation "natural rhythm" factor in the operation of China's market economy is becoming more and more obvious.

It is precisely because of these major changes in the social and economic situation that finance is still in an important position in the distribution of national income, but it can no longer determine the overall balance of the national economy as in the past. Under the condition of socialist market economy, fiscal policy and monetary policy are both important means of macro-control, and they should and must cooperate with each other to adjust the balance between total social supply and total demand, and to stabilize the cyclical fluctuations of the economy, so as to avoid or reduce the damage it brings to the economy and society as much as possible. Therefore, under this general goal, we should not pursue fiscal balance in isolation, but pay special attention to the coordinated balance between finance and finance, the comprehensive balance between the total operation of social funds and the total supply and demand and structure of society. In order to achieve this goal, finance or banks sometimes need to adopt austerity or expansion policies in different years, which is consistent with the spirit of fiscal balance policy, not contradictory.

The marketization of the economy and the complexity of the economic situation determine that today's comprehensive balance control means should be changed from direct control to indirect control, and the control object should also be changed from the compulsory arrangement of the physical form to the lever adjustment of the value form. However, none of these can deny the core of the comprehensive balance thought.

Looking back on the economic development since the founding of the People's Republic of China, we can see such a phenomenon. When the supply and demand balance of the national economy is destroyed and fluctuates greatly, people will affirm and attach importance to the comprehensive balance theory and make economic adjustments accordingly. When the economic adjustment returns to balance, the national economy runs smoothly and makes great achievements, there is often a tendency to deny and abandon the comprehensive balance theory; When the balance relationship is broken, a new cycle begins. This historical phenomenon, on the one hand, explains the theory of the total balance of social supply and demand and the comprehensive balance of macro-economy, reflects the objective law of socialized mass production and shows its vitality; On the other hand, it shows that the one-sidedness and limitations of people's subjective understanding can easily lead to the repetition of the national economy and even the high tuition fees.

Under the situation of China's market economy, "economic cycle" has become a problem that can not be ignored. How to smooth out the fluctuation of economic cycle and reduce its losses, that is, to implement "counter-cyclical" macro-control, is a major issue that we must focus on. We must jump out of the framework of adhering to the annual fiscal balance under the planned economy, and further expand our vision to cross-annual and cross-economic cycle camera control, as well as all-round coordination with monetary policy, balance of payments policy and industrial policy in the dynamic. The experience of western countries in implementing countercyclical adjustment in the coordination of fiscal policy and monetary policy is worth learning. In the mid-1990s, China successfully achieved a "soft landing" of the national economy by implementing moderately tight fiscal and monetary policies. 1998, the practice of implementing active fiscal policies, increasing investment and expanding domestic demand in coordination with monetary policies, is a typical example of seeking the balance between total supply and demand through macro-control in the new period.