What Are the Different Instruments of Fiscal Policy?

Fiscal policy tools, also known as fiscal policy instruments, refer to the various fiscal instruments and measures adopted by the country to achieve certain fiscal policy goals. They mainly include fiscal revenue (mainly taxes), fiscal expenditures, government bonds, and government investment. Fiscal policy tools include income policy tools and expenditure policy tools. Revenue policy tools are mainly taxes. Expenditure policy tools are divided into purchase expenditure policies and transfer expenditure policies. Among them, purchase expenditure policies are different from public construction expenditure policies and consumer expenditure policies.

Fiscal policy tools

(1) Fiscal revenue (mainly

Financial measures: mainly refers to taxation,

Fiscal policy tools include income policy tools and expenditure policy tools. Revenue policy tools are mainly taxes. Expenditure policy tools are divided into purchase expenditure policies and transfer expenditure policies. Among them, purchase expenditure policies are different from public construction expenditure policies and consumer expenditure policies.

1. Tax policy Tax policy exerts its regulating effect on the economic cycle through two aspects of tax increase and tax reduction. It has the following characteristics: (1) It requires a certain legal process and a long time lag in decision-making. The tax increase and decrease of a country's government are all achieved by adjusting tax laws, and tax laws need to pass certain political procedures before they can be adopted and implemented. (2) It is easy for the government to reduce taxes, and it is easy for tax increase to be opposed by taxpayers. (3) Taxation directly affects people's disposable income, and it is a permanent impact free of charge. When the government makes up for the fiscal deficit by increasing taxes, the essence is to transfer funds from the hands of individuals or businesses to the government. If the government's expanded expenditure is not efficient or ineffective, the effect of suppressing demand will be double. . (4) The government's tax reduction policy is achieved by increasing the disposable income of residents, which in turn depends on the marginal consumption tendency of residents, which is an uncertain factor for the government.

2. Public works expenditure policy. The government's artificial expansion of public works expenditures and more commitments to projects that are unwilling or unwilling to invest in years of depression can increase aggregate demand and help economic recovery. The public project expenditure policy has the following characteristics: (1) Strong accumulation. The result of public construction expenditure policies is often to form a number of public investment projects that can be consumed by residents for a long period of time. They have a cumulative nature and are easily favored by fiscally productive countries. (2) The possibility of low efficiency is high. Because the purpose of investing in public works is to stimulate the economy to solve employment problems, decisions are often hastily made, and the need for public works itself becomes a problem. (3) The time lag is long. The construction period of a project ranges from one to two years, to several years, ten years or even decades. The economic situation may change before the expenditure on labor and raw materials is spent. The fiscal policy has been changed from reverse adjustment to positive adjustment, which has increased the instability of economic fluctuations. (4) Public works policy is the use of local policy tools by the central government to regulate the economy. It may break the original equilibrium and create a new imbalance between regions.

Public works are a kind of local public goods, which should be invested by local governments. In order to regulate economic stimulus demand, the central government constructs certain public projects in some specific places. In essence, it uses national funds to provide public goods to certain places, and it has undertaken construction projects that should have been paid by the local government. Competition for projects and investment increases the risk of investment and new disparities in bitterness and joy will appear. Therefore, public works policy tools must be coordinated with intergovernmental fiscal transfer payment policies.

3. Government consumable payment policy The government consumable payment policy refers to the direct purchase of labor services and consumer goods by the government for the current period, such as increasing government employees, increasing employee wages, expanding the purchase of office equipment, and so on. This policy has the following characteristics: (1) Compared with the public project expenditure policy, its time lag is short. (2) Compared with the transfer spending policy, its fairness is poor. For example, the increase in government employees' wages compared with the increase in unemployment benefits will increase the income gap between the employed and the unemployed; if the income of both is increased in the same proportion at the same time, the impact on demand will depend on their marginal consumption tendency. As far as individual consumers are concerned, their marginal consumption tendencies are related to his personal preferences; as far as consumer groups are concerned, we need to analyze from their age, occupation, and social environment. Compared with other workers of the same quality in a country, if the actual income of government employees (including amateur income, gray income, and even black income should be included) is not low, the stimulus effect of this expenditure on demand is also extremely limited. of. (3) The efficiency of this policy depends on the efficiency of government work. For example, is it necessary for the government to set up so many institutions, to employ so many people, whether the salaries of government employees are high enough, whether the office facilities are good enough, and so on. As Aisha said, developing countries government agencies have a tendency to swell themselves. This is because large private companies are not as important as industrialized countries. Low-wage government employees are already enviable and generally contribute regardless of merit. Raising wages locally has a stimulating effect on the tendency of institutions to expand. (4) Changes in government employee wages have an important impact on the labor market. One is that "skilled technicians (doctors, engineers, etc.) are more likely to emigrate than senior executives and managers, because the former enjoys a much broader overseas market." Second, the increase in wages of workers in any sector will vary to varying degrees Increasing the average wage level of the whole society, especially the increase of government employees' wages, has a strong demonstration effect on society, which is equivalent to raising the minimum wage level. For the sake of reducing costs, rational companies would rather reduce the number of hired workers. Expansion of employment has certain negative effects. (5) Consumption expenditure, especially the source of funding for government employees to raise wages, should be tax revenue, and avoid using government borrowing income, which is determined by the nature of government activities that provide public services to society.

4. Transfer payment policy The transfer payment policy is a policy that provides free financial assistance to enterprises, individuals or lower governments through the government to regulate social distribution and production. For example, subsidies to residents, investment subsidies, price-limit subsidies, and import and export subsidies to enterprises will directly promote the development of production or guarantee the increase of corporate profits. This policy has the following characteristics: (1) It has a strong impact on national income distribution. Transfer spending itself has the function of directly affecting the distribution of national income. The government's increase in spending on low-income people can reduce the gap between the rich and the poor. (2) The transfer payment policy has a greater effect on the expansion of demand. The marginal consumption propensity of low-income earners is greater than that of high-income earners. Increasing the fiscal subsidy expenditure for low-income earners has a greater stimulating effect on the total social needs. (3) Poor accumulation. The possibility of transferring payment funds into accumulated funds is smaller than the two above-mentioned expenditure policies, and the part for consumption will be greater. (4) The impact on demand has a great relationship with the level of beneficiaries. For example, from the perspective of age structure, young people generally have the largest marginal consumption tendency, middle-aged people second, and the elderly have the lowest marginal consumption tendency.

Fiscal expenditure policy also affects the economy with the multiplier effect of multiple expansion. The government should choose different combinations of expenditure policies according to different situations. At the same time, it also needs to cooperate closely with taxation policies, etc. to exert a better policy effect.

5. Public debt policy. The issuance of public debt is an important issue for the financial sector, but the issuance of public debt will have a certain impact or even a major impact on the financial situation. On the issue of public bonds, when they are issued, and the conditions for issuance, the following factors need to be paid attention to: the first is the supply and demand of social funds, especially the demand for public funds by public idle funds; the second is the financial status, such as credit scale, interest rates, financial The degree of market perfection, etc .; again, the government's ability to pay debts, especially when there is a large space for social government demand for government bonds, and it is even more important to avoid the situation of excessive government debt burdens. Public debt itself is a kind of direct credit, which can avoid financial risks caused by excessive indirect credit. However, in some cases, it will also become an indirect financing channel. For example, when a commercial bank selects public debt as the main loan object of funds, the problems inherent in indirect financing may arise here.