PUBLIC FINANCES: WHY IS THERE AN IMBALANCE BETWEEN REVENUE AND EXPENDITURE?

In Mathematics, an equation is the equality of two quantities, whereby the first value consists of known data, and the second consists of data that needs to be defined. An equation is a mathematical expression that defines the equality of two sides. The term “equation” is used widely and can be applied to any problem that needs to be solved. In order for an equation to be successfully solved, it is necessary to define the unknown variables, after careful processing of the known variables. It is very important that both the given data of the first part of the equation and the requested data of the second part are very clear.

 In public finances, the most common equation is the one that refers to equality of revenue and expenditure. If the state revenue and spending are not equal, a new variable enters the equation: debt. What makes the equation more specific is the kind of revenue and expenses, which is defined by government policies. These policies define the kind of taxes and the societal groups that will be paying them, as well as the kind of state expenditure and the societal groups that will benefit from this public spending. Our description of the above public finance equation might sound complicated, however, the equation is workable, and we believe that it can be an effective model of managing state finances, as long as there is clarity of the equation data, which is in direct correlation with the clarity of the government policies.

Now comes the question: “how do we clearly define the data for both the state revenue and the state expenditure?” At first glance, the answer is simple: the first part of the equation (the state revenue) can be stabilised by the clarity and transparency of the government decisions. Two other factors are equally important: a) coherent and comprehensive legislation and b) an effective enforcement mechanism of the government decisions. However, as far as these two factors are concerned, our country is far behind other European countries, and the end result is that government spending exceeds revenue. At first glance, the fragmented and confusing legislation can be attributed to lack of knowledge and lack of competence on the part of our political leaders; however, upon closer examination,  it can also be attributed to ulterior motives, since political leaders can use this ambiguous legislation in order to benefit persons or societal groups of their liking.

The answer to the second part of the equation (the state expenditure) is also simple: government expenditures should provide the most benefit to the society as a whole. Many mathematical models can be developed to represent this idea in mathematical terms, however, our political leaders need to provide us with figures that are reliable, objective and precise. Public spending should be defined by transparency,  and the distribution of funds should be geared towards investment and not consumption; this kind of spending truly benefits as many individuals and societal groups as possible. If, however, public spending is done for ulterior motives (i.e., if our political leaders spend the state funds on those people who have voted for them, so that they can get re-elected during the next term), then an imbalance between public revenue and expenditure is created, and this imbalance affects the whole political system. We have experienced this imbalance for many years, and many individuals and groups have suffered financial ruin as a result. The relation between achieved results and money spent is extremely disappointing. The inflation of public spending, without any real benefit to the Greek people as a whole, has led our country to a huge debt, which all citizens are asked to repay. This is extremely unfair to those who did not benefit from this extreme public spending. Unfortunately, with few exceptions, our political leaders continue to waste money and to follow policies which have created a huge imbalance in the equation between revenue and state expenditures.

     In our editorials, we have many times showcased the formula which was applied by families in Mani for a very long time: first, they made full use of their land and animal resources and they limited their expenses to the absolutely necessary. When they could not balance their income and their expenses, they worked as “day labourers”, tending the land and taking care of the animals of farmers in the neighbouring villages. In this way, not only they achieved balance of the family budget, but were also able to finance the studies of their children who wanted to continue their education. This could be a good model to our political leaders, so that they can also achieve balance between public revenue and expenses; it is their obligation to keep their promise to their electorate.

Δημοσιεύτηκε στο 2017 MAIN ARTICLE IN ENGLISH, MAIN ARTICLES IN ENGLISH

Αφήστε μια απάντηση

Η ηλ. διεύθυνσή σας δεν δημοσιεύεται. Τα υποχρεωτικά πεδία σημειώνονται με *

*