What Are the Objectives of Fiscal Policy?

Fiscal policy objectives are the goals that the state will use to implement fiscal policy tools. It forms the core content of fiscal policy and is the leading aspect of fiscal policy. The establishment of fiscal policy objectives varies from one country to another at different times.

Fiscal policy goals

The goals of China's current fiscal policy include the following aspects.

(1) Relatively stable prices

Prices are relatively stable. This is an important goal pursued by all countries in the world, and it is also a basic requirement for the stable function of fiscal policy. Prices are relatively stable, not because prices are frozen, but rather that fluctuations in the overall price level are constrained within the limits of stable economic development. Relatively stable prices can be specifically explained as avoiding excessive

Fiscal policy objectives refer to the expected value to be achieved by fiscal policy. In determining fiscal policy objectives, government decision-making departments should pay attention to several characteristics of fiscal policy objectives:

(1) Fiscal policy objectives are restricted by the function of fiscal policy;

(2) the fiscal policy objectives have certain continuity in time;

(3) Fiscal policy objectives are spatially consistent.

The objectives of fiscal policy have multiple characteristics and constitute a target system, which generally includes four goals: economic stability, economic development, fair distribution, and balanced budget. The economic stability goal of fiscal policy is decomposed into

The fiscal policy mentioned here is not all the government's fiscal revenue and expenditure behaviors, but a policy tool that specifically refers to the government's macro-control. Its function is to stabilize the economy, that is, to ensure the stable operation of the national economy and avoid economic conditions such as unemployment and inflation . According to the time that fiscal policy stabilizes the economy, it can be generally divided into two types: stable fiscal policy and re-stable fiscal policy. A stable fiscal policy aims to keep a stable economy and to prevent it from deviating from a stable state. It is more about preventing economic conditions in advance.

Since the market-oriented reform, China's fiscal policy has been implemented for many years, and a lot of experience has been accumulated during this period, with some promising results. However, if we use economic theory in combination with China's reality to examine it, we can still find some problems.

(I) Realistic Problems Existing in China's Fiscal Policy Objectives

In the design and implementation of China's fiscal policy, the most prominent problem is that the goal setting is unreasonable. The policy has always been aimed at how much economic growth has taken place. As a result, the economy has grown, but the direct and ultimate goals of fiscal policy have not. Fully reached.

1. The economy itself is not stable. For many years, the government's fiscal policy has always been aimed at growth, and the target value has been set very high. Actually, the annual growth rate through policy implementation is more than 7% (see Table 1). The growth target is indeed achieved, but it is At the same time, the unemployment rate has been increasing year by year (see Table 1). It is generally believed that due to statistical reasons, the actual unemployment rate may be higher than the above figure. This shows that growth is disconnected from employment, and the increase in output has not led to a corresponding increase in employment. This can also be proved by the employment elasticity change that describes the relationship between output and employment. According to Xia Li's research: From 1986 to 2000, China's employment flexibility continued to decline. From 1986 to 1990, the average annual GDP growth was 7.9%, the employment elasticity was 0.308, and the economic growth of 1% led to an increase in employment of 3.6 million people. The average growth between 1996 and 2000 was 8.3%, and the employment elasticity was 0.138. That is to say, the employment increase driven by economic growth is only 970,000, and the contribution of growth to employment is very limited. This empirical analysis also shows that growth drives employment growth Decreasing trend. It can be seen that Austrian affirmation is not in line with reality in our country. Therefore, it is not in theory and practice to try to solve the employment problem simply by increasing GDP. Economic growth has not only failed to solve the unemployment problem, but has also caused an overproduction of 80% of commodities in the commodity market, indicating that China's economy itself lacks stability.

2. The overall harmony of society needs to be strengthened. Objectively speaking, with China's rapid economic growth, citizens have benefited a lot, but because the growth and employment are not synchronized, the actual unemployment rate remains high, which has also caused many social problems and affected social stability. The effect of fiscal policy is still far from the realization of the overall social goals, and economic growth has not led to a comprehensive and harmonious society.

(2) The Realistic Choice of China's Fiscal Policy Objective Adjustment

Based on the existing problems of fiscal policy objectives, in order to make better use of the role of fiscal policies, our fiscal policy objectives need to be adjusted urgently.

First of all, from the perspective of economic theory: due to the contradiction and limited role of the aforementioned economic policy objectives, as well as the different characteristics of policy tools, the goal of fiscal policy to stabilize the economy can only be set on full employment-an adjustable goal Instead of economic growth, this is an intermediate goal that many scholars in China have mistaken for policy goals.

Secondly, from the perspective of China's reality: As the unemployment problem is getting worse, and as a country with a large population, the employment problem is undoubtedly more prominent and important than other countries. In particular, we are currently starting to build a harmonious society. Its basic The requirement is social stability, and the high unemployment rate will undoubtedly affect social stability. Therefore, the reality also requires the government to give the greatest possible attention to the employment issue, which is in line with national conditions and public opinion.

It can be seen that no matter from the economic theory or the reality of our country, we can draw the same conclusion: China's fiscal policy goals should be adjusted from economic growth to full employment. This is not only a requirement of economic stability, but also a call for social harmony. The government does a lot of work. So how can fiscal policy tools achieve this goal through specific fiscal revenue and expenditure means under the goal of full employment?

(III) Approaches to Realizing China's Fiscal Policy Objectives

The key to realizing fiscal policy goals is to maximize employment. Although the work in this area is very difficult and many issues need to be studied, combining the characteristics of China's large population and foreign employment experience, the focus should also be on labor supply and demand.

On the one hand, from the perspective of labor demand: when the economic instability is in recession, the government can stimulate manufacturers' investment through active fiscal policies to increase expenditures and reduce revenues, thereby causing aggregate demand to increase, which in turn will increase labor demand. When the economy is stable, the government can strive to do the following three tasks through sound fiscal policies:

The first is to strengthen support for the establishment and operation of small businesses. Supporting self-employment will help reduce unemployment. According to the survey: Among high school students in the United States, 70% of students want to start their own business as bosses, compared with 33% in the United Kingdom. This gap can explain to some extent why the United States has a lower unemployment rate than the United Kingdom. The more a society is willing to be the boss, the more people are self-employed, and the unemployment rate is naturally low. Supporting small business operations will also help increase employment. Both Chinese and foreign experience have shown that small enterprises account for a small proportion of a country's total output, but absorbed labor accounts for a large proportion of a country's total employment. Therefore, from the perspective of achieving economic stability and social harmony, increasing employment requires the government to "grasp small and enlarge." The number of people employed in small businesses in the United States accounts for 70% of the total employment. Since the 1970s of the Fortune 500 companies in the United States, the number of jobs provided has begun to decline year by year. Most of the reduced positions have been made up by small businesses. The focus of the government's employment solution is to "grasp the small and magnify it". This is still the case in developed countries where the employment problem is not prominent. In China, where the employment situation is severe, the government should change its mindset to "grasp the small and magnify it."

The second is to strengthen support for the service industry. The economies of scale of the service industry are not obvious, and most of them are labor-intensive production. Capital is difficult to replace labor and can absorb a large amount of labor. In addition, the demand for products in the service industry is relatively stable and less affected by the economic cycle. In particular, the effect of reducing cyclical unemployment is better, so whether it is for economic stability or social harmony, the government should give more support.

The third is to strengthen the employment of manufacturing capital. Reduced capital idle can absorb more labor in the short term, and in the long run, because the capital employment rate is high, the return on capital is increased, which in turn will lead to more investment in the future and thus absorb more labor. Here, we cannot rely on high-tech companies to solve employment problems. On the one hand, most high-tech companies have shorter lifespans, which are generally 5 years in the United States. 8. And the development is not faster than the manufacturing industry. According to the "Enterprise" magazine in Chicago, USA, every year, the top 100 profitable companies are selected. More than half are manufacturing industries, and less than a quarter are high-tech.

On the other hand, from the perspective of the labor supply side: The government can guarantee the effective supply of labor through fiscal revenue and expenditure. The specific performance is as follows: First, it provides free vocational training and education so that workers can acquire an employment skill that meets market needs; The second is to provide employment information to workers and establish a free labor market. It is necessary to strengthen the information communication between the supply and demand sides, so that skills and jobs are adapted to minimize structural and frictional unemployment.

Only when both sides of labor supply and demand are combined, can the government better achieve full employment, truly achieve economic stability, and effectively build a harmonious society-a majority who can share social progress and development, free, fair, stable, and rich society.