What is Deficit Spending?

Deficit is a Chinese word, pronounced chì zì, which refers to the number of expenditures over income in economic activities. It is called a deficit because it is written with a red pen in the bookkeeping, and it refers to the red word in two.

[chì zì]

Deficit basic concepts

The deficit is mostly used for fiscal purposes, meaning a loss. The difference between fiscal expenditure and revenue in a fiscal year. It is named because of the red letter in accounting practice. In China, fiscal revenues and expenditures are balanced by the state budget. Fiscal deficits are usually expressed as the difference between the expenditure of the results of the implementation of the budget and the income, so it is also called the budget deficit. The fiscal revenue for one year represents a part of the social products available to the country for centralized control in that year. Fiscal expenditures are greater than revenues and a deficit occurs, which means that the social purchasing power formed by these expenditures does not have corresponding social products as material guarantees.

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Deficit policy

To make up for fiscal deficits, some countries have to issue additional banknotes as a last resort, that is, to increase the issuance of currencies without material guarantees. If the fiscal deficit is too large, the fiscal currency issuance is too much, and the supply of materials cannot meet the needs for a long time, inflation will occur, causing prices to rise, resulting in a decline in the living standards of residents. Therefore, fiscal expenditures should be arranged in accordance with the principle of spending within the means to keep the fiscal revenue and expenditure in balance. However, due to work mistakes or accidents such as wars and severe natural disasters, fiscal shortfalls or overruns often result in deficits. Under normal circumstances, the finances of socialist countries should adhere to a balanced income and expenditure, with a slight balance, and not run a deficit. Adhering to the balance of fiscal revenue and expenditure must not only focus on fiscal revenue and expenditure itself, but also link fiscal revenue with the entire national income distribution to prevent false balances and hidden deficits. For example, the planned revenue indicators are unrealistic, and they are realized by crowding out other income in the implementation. Insufficient arrangements for expenses to be paid and gaps in expenditures are left. The balance thus formed is not a real and reliable balance, but a superficial one. False balance. An enterprise's misreporting of output value, profit, or disconnection of production and sales will make a part of fiscal revenue false, and fiscal revenue and expenditure may be balanced, but in fact there are hidden deficits. If the expenditure is greater than the income and there is a slight deficit, this is also a favorable state, indicating that the national fiscal revenue has been effectively and fully utilized. But we must keep the deficit within limits.

Examples of Deficit

It was all caused by the financial crisis, and Japan reappeared its annual trade deficit after 28 years.

The preliminary statistics of the 2008 annual trade statistics released by the Ministry of Finance of Japan on the 22nd (subject to customs clearance) show that the trade balance of exports after deducting imports has a deficit of 725.3 billion yen (approximately RMB 50.1 billion), which is the second largest reason for Japan The oil crisis led to a surge in imports for the first 9 GAI47 deficits since 1980.

Japan's trade surplus in the previous year was 10,155.3 billion yen. The main reason for the first deficit in nearly 28 years is that the global financial crisis has affected the real economy, leading to a sharp decline in Japanese exports, reflecting the fragility of the Japanese economy, which has been relying on external demand for development. In 2008, exports totaled 711.4435 billion yen, a year-on-year decrease of 16.4%, the largest decline since the 1980 figures were comparable. From the perspective of specific commodities, the decline rates of electronic products such as automobiles and chips were the highest, with 24.2% and 19.7% respectively. Total imports amounted to 71,886.8 billion yen, a decrease of 4.1% year-on-year, and the first decline. At the same time, Japan s trade balance in March 2009 was 11 billion yen, but it fell sharply by 99.0% over the same period.

Irish fiscal deficit cuts

According to the latest news from the research world, Dublin-Ireland Finance Minister Michael Noonan said on Tuesday that although the deficit reduction in the next year's budget will be lower than expected, the Irish government can still meet the fiscal austerity target set by the international rescue plan.

Noonan said that the 2014 budget will seek to reduce the deficit by about 2.5 billion euros (about 3.39 billion US dollars), which is far less than the 3.1 billion euro tax increase and reduction plan required by international creditors.

He told reporters before attending the government s meeting to discuss the details of next week s budget that Ireland does not need to fully implement the 3.1 billion euro tax increase and reduction plan to meet the fiscal austerity targets set by international creditors because the government has other budget reduction They can also be considered as part of fiscal consolidation.