Budget, State

Budget, State

 

the annually compiled estimate (schedule) of a state’s forthcoming incomes and expenditures. The essence of any country’s state budget is determined by the economic system of the society and the nature and functions of the state.

In capitalist countries additional exploitation of workers occurs through the state budget. The development of the budget is subject to the elemental laws of capitalist production, and thus it emerges as merely a reference “schedule of the anticipated incomes and expenditures of the state for the current year” (K. Marx, in K. Marx and F. Engels, Soch., 2nd ed., vol. 9, p. 78). In accordance with the functions of the bourgeois state, a substantial portion of the state budget is used for nonproductive purposes (the militarization of the economy, the apparatus of oppression); thus the budget reflects the parasitic nature of the consumption of the national income. Because of the cyclical nature of the development of the capitalist economy, the state budget is marked by extreme instability. Slumps and crises bring declines in budgetary receipts while simultaneously producing increases in budgetary expenditures. The instability of the state budget is manifested in frequent deficits, which have become chronic in the period of the general crisis of capitalism.

The state budgets of contemporary imperialist states spotlight the essence of state monopolistic capitalism. The direct intervention of the bourgeois state in the economy and in the processes of production, distribution, and redistribution of the national income entails an increase in the role of the state budget. The proportion of the national income concentrated in the hands of the state and redistributed through the budget grows. Thus, at the beginning of the 20th century, the governments of the developed capitalist countries (the USA, Great Britain, the Federal Republic of Germany, France) accumulated 5-10 percent of the national income in their budgets, whereas by 1968 the amount had reached 30-45 percent. In a number of countries, between one-third and one-half of all investments in fixed capital are financed, directly or indirectly, through the state budget.

The main source of income for the budgets of the capitalist states is taxation: taxes constitute 85-95 percent of all budget receipts and fall essentially on the industrial and office workers, peasants (farmers), and petite bourgeoisie. Thus, in 1967 tax receipts accounted for 92.2 percent of all budget income in the state budget of France, about 95 percent of budget income in West Germany and the USA, and 91.2 percent in Great Britain. Nontax income (such as receipts from enterprises and from state properties) accounts for 5 to 15 percent. Although tax pressure is constantly intensifying, taxes are not sufficient to cover the increasing expenditures and budget deficits of the bourgeois states, which resort to loans and issue of paper money (see Tables 1 and 2).

Table 1. Receipts of the federal budget of the United States. (billions of dollars)
 1968-691969-70
 Amount(anticipadet fulfillment)Percent of totalAmount (projected)Percent of total
Income tax from the population ..............84.445.390.445.5
Tax on corparation profits ...............38.120.537.919.1
Excise and customs duties ...............17.19.218.09.1
Taxes for social insurance ...............40.521.845.923.1
Other receipts ...............6.03.26.53.2
Total ..............................186.1100.0198.7100.0

In capitalist countries, the main portion of the expenditures of the state budget is made up of expenditures associated with the conduct and preparation of new wars (direct and indirect military expenditures). In developed capitalist countries, these outlays amount to as much as 50 percent of the budget expenditures. From military orders funded by the state budget, monopolies obtain tremendous profits, which they use to maintain business conditions at a high level. Expenditures for the state debt (interest payments on the state debt) are substantial in the budgets of many capitalist countries. These outlays are indirect military expenditures, since the loans themselves are essentially used for military purposes.

Table 2. Reception of the goverment budget of Great Britain (billions of pounds)
 1968-691969-70
 Amount(anticipadet fulfillment)Percent of totalAmount (projected)Percent of total
Income tax (basic and supplementary) ...............4.5634.15.1633.8
Tax on corporation profits ...............1.3510.11.6911.1
Tax on captial gains ...............0.050.40.130.8
Customs and excise duties ...............4.6034.44.9532.4
Selective Employment Tax ...............1.3610.21.8912.4
Other receipts ...............1.4410.81.459.5
Total ...............13.36100.015.27100.0

Expenditures connected with the bourgeois state’s intervention in and regulation of the economy constitute an important item among budgetary outlays. Since World War II, state financing of the economy has developed broadly in a number of developed capitalist countries. There are major expenses associated with the construction of state enterprises and the payment of compensation to former owners of nationalized enterprises. For example, in Great Britain these payments reached £120-200 million during various years, and in France the amount reached more than 200 million francs. In the form of direct capital investments and subsidies to monopolies, the French state finances up to 50 percent of the total sum of capital investments, whereas in West Germany the figure is 30-40 percent and in Italy, up to 60 percent. Budget expenses for the infrastructure are growing: the construction of roads, bridges, ports, gas pipelines, educational institutions, public health institutions, and other units that consume much capital and have low rates of profit and thus are disadvantageous for the monopolies. The bulk of the expenditures for the infrastructure are financed from local budgets. In the context of the scientific-technical revolution, expenses for scientific research are growing: in the USA, outlays increased from $5.7 billion in 1954 to $24 billion in 1967, with as much as 70 percent of these expenditures covered by the state budget. In West Germany, these expenses increased by nearly a factor of six between 1958 and 1967, with more than half of them being paid by the state budget; in France, the state budget covers two-thirds of these expenses. Large sums go for such purposes as encouraging exports and providing credits to foreign states. Substantial sums of the state budget are spent to maintain the state apparatus, including officials, the police, and the courts. Expenses for social and cultural needs (education, public health, and social insurance) are relatively small; they are associated with the training of skilled specialists for capitalist enterprises and the maintenance of the work capacity of the population. Bourgeois states are forced to increase these expenditures under the influence of the class struggle and the growing demands of the working masses. The figures in Tables 3 and 4 give some notion of the structure of expenditures in the state budgets of capitalist countries.

The state budgets of developing countries have special features. To a considerable degree, the budgets are used for the development of the national economy, expansion of the state sector and of social and cultural construction, the liquidation

Table 3. Expenditures of the federal budget of the United States1 (billions of dollars)
 1968-691969-70
 Amount(anticipadet fulfillment)Percent of totalAmount (projected)Percent of total
1 In 1968, the federal budget was reorganized to include social insurance monies and other treasury funds, thus bringing a decrease in the proportion of military expenditures (which had previously reached 70 percent of the federal budget proper) and an increase in the proportion of social or cultural expenditures
Direct military expenses ...............81.044.181.541.7
Conquest of space ...............4.22.33.92.0
International affairs and finances ...............3.92.13.81.9
Subsidies to branches of the economy ...............17.69.618.99.7
Military pensions ...............7.74.27.73.9
Payments on the state debt ...............15.28.316.08.2
Expenditures on education and public health ...............18.610.120.910.7
Social security ...............37.420.442.021.5
Other expenditures ...............3.21.76.53.3
Minus interdepartmental extra charges and deductions ...............-5.1-2.8-5.7-2.9
Total ...............183.7100.0195.3100.0

of the consequences of colonialism, and the creation of an independent economy. In Burma, the Arab Republic of Egypt, India, and a number of other countries, more than 50 percent of the outlays of the state budget are directed to these goals. In these countries, there are also special budgets of capital investments, the resources of which are earmarked for investment in the national economy and for social and cultural development.

Table 4. Expenditures of the state budget of Gread Britain (billions of pounds sterling)
 1968-691969-70
 Amount(anticipadet fulfillment)Percent of totalAmount (projected)Percent of total
Military expenses ...............2.217.12.316.2
Civilian expenses ...............8.665.89.366.5
Consolidated fund for regular services ...............0.86.20.85.6
Total ...............11.689.112.488.3
Excess of receipts over expenditures ...............1.72.2
increase and movement of consolidated fund ...............1.410.91.611.7
Total expenditures, including increase of consolidated fund ...............13.0100.014.0100.0

Turning to the state budget in prerevolutionary Russia, the first evidence of a general estimate of state income and expenditures in prerevolutionary Russia and of city estimates dates to 1645. Under Peter I, major financial reforms were carried out in order to increase the treasury’s receipts and improve the system of collection: collegiums to direct financial affairs were established (1718). The Petrine estimate for 1723 included 9,200,000 rubles of income and 9,578,000 rubles of expenditures. The foremost sources of income were the poll tax (5,096,000 rubles), taxes on drinking houses (1,002,000 rubles), and customs receipts (656,000 rubles). Expenses for the army and navy amounted to 6,899,000 rubles. The Ministry of Finances was established in 1802, and it began to compile annual budgets regularly. Although the budget annually showed an excess of receipts over expenditures from 1897, it actually had a chronic deficit. The “free cash” of the treasury was formed at the expense of an increase in the state debt, increased prices on vodka, and other sources (see V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 6, pp. 257-63; vol. 23, pp. 25-27). The main items of income in the state budget were receipts from the vodka monopoly, direct and indirect taxes, and duties. Foremost among expenditures were direct military expenses and payments for the state debts. During World War I, the budget deficit rose from 39.1 percent of the total sum of expenditures in 1913 to 81.7 percent in 1917. Russia’s state debt increased from 8.8 billion rubles in 1913 to 60 billion rubles coming into the spring of 1917.

In socialist countries, the state budget expresses the economic relations of the planned distribution of the social product and national income among classes, social groups of the population, and subdivisions of social production and economic regions of the country on the basis of social property. The state budget of the USSR is the basic financial plan of for the formation and utilization of the state fund of monetary resources of the Soviet state. The state budget of the USSR concentrates the part of the national income of the Soviet Union that is directed toward the planned development of industry, agriculture, transportation, trade, and other branches of the national economy; the improvement of the material well-being and cultural level of the toiling masses; the defense of the country; and the maintenance of the bodies of state government. In the USSR, the state budget provides for approximately one-half of the expenses connected to net investment (capital investments, increased capital circulation, the formation of reserves); it provides for about 80 percent of the resources earmarked for social and cultural needs, as well as for the expenses to maintain the organs of state administration and to defend the country. The centralization in the state budget of a substantial portion of the money accumulation of the socialist economy and of a certain share of the income of the population is an important condition for the planned development of the national economy, the maintenance of optimal proportions between the accumulation fund and consumption fund of the national income, and the ensuring of rational balance relations among the branches of the national economy.

The state budget of the USSR has played a large role in creating the foundation of the socialist economy and in building socialism. During the first five-year plans (1929-40), the distribution and redistribution of the surplus of the economy and the income of the population by means of the state budget supplied the state with necessary resources and facilitated the formation and development of the productive relations of socialism, as well as contributing to the limitation and exclusion and ultimately to the liquidation of capitalist elements. By means of the state budget, a large portion of the national income was directed toward the industrialization of the country—in the first place, the creation and development of heavy industry; the socialist reconstruction of agriculture; the implementation of the cultural revolution; and the strengthening of the country’s defensive power. During the Great Patriotic War (1941-45) enormous monetary resources were mobilized by means of the state budget for the development of the military economy and the fulfillment of the needs of the front and the rear. During the postwar years, the budget was the basic source of expenditures for rehabilitating and developing all branches of the national economy and for increasing the well-being of the people. Under contemporary conditions, the state budget serves as one of the important instruments for building the material and technical basis of communism. About half of the country’s national income, including over 80 percent of the money accumulations of the socialist economy and some of the income of the population, are distributed through the budget.

The bulk of the income of the state budget of the USSR comes from receipts from socialist enterprises—more than 90 percent of the total income. These receipts are increasing as a result of the rapid development of all branches of the socialist economy. Income from socialist enterprises enters into the budget in the form of payments out of profits (fees for production funds, fixed [rent] payments, payments of the free balance of profit), turnover taxes, payments of state enterprises for state social insurance, and several other sources of payments. Payments to the budget from profit, in connection with the economic reforms implemented since 1966, have been reorganized so as to increase the interest of the workers of enterprises in the raising of profits and in the expansion and technical perfection of production. Toward this end, a more substantial portion of profits than in the past remains at the disposal of the enterprises for purposes of the expansion of production (capital investment, increased circulating capital, and so on) or is allotted for the workers’ material incentive funds of the enterprises. The entire turnover tax is contributed to the budget by enterprises. In 1970 payments by the population constituted less than 10 percent of the total income of the budget; their importance has decreased substantially in the postwar period as many taxpayers were completely or partially freed from paying taxes and after the issue of state domestic loans sold by subscription was abolished in 1957. The increase in the absolute total of taxes collected from the population has

Table 5. Structure of receipts of the state budget of the USSR (billions of rubles)
 19401950196019651971(plan)
 AmountPercent of totalAmountPercent of totalAmountPercent of totalAmountPercent of totalAmountPercent of total
Receipts from the socialist economy ...............16.088.835.483.770.191.093.991.8146.190.8
Including:
Payments from profits of state enterprises ...............
2.212.24.09.518.624.130.930.254.834.1
Turnover tax ...............10.658.823.655.831.340.638.737.854.233.6
Income tax from cooperatives, kolkhozes, and public organizations ...............0.31.60.61.41.82.41.51.51.40.9
Funds of state social insurance ...............0.85.01.94.73.74.95.65.58.95.5
Receipts from the population ...............2.011.26.916.36.99.08.48.214.99.2
Including:
Taxes from the population ...............
0.95.13.68.55.67.37.77.513.88.6
State loans ...............0.96.12.77.30.91.20.20.20.40.3
Total ...............18.010042.310077.1100102.3100161.0100

been connected with the increased number of industrial and office workers and increased workers’ wage funds and average wages, simultaneous with the decreased rate of taxation (see Table 5).

Over 80 percent of budget expenditures is made up of expenses for financing the national economy and social and cultural needs (see Table 6). Expenditures for the national economy consist primarily of capital and other expenses associated with the construction of new enterprises, the expansion and technical renovation of existing enterprises, the increase of their circulating capital, and other outlays for development. With the implementation of economic reforms, the role of the enterprise’s own resources and bank credits in increasing the fixed and circulating capital of enterprises has grown. Outlays for social and cultural measures include financing expenditures for education and public health, for the construction of educational and medical institutions, for state social insurance grants, pensions, and allowances, and for other expenses involved in satisfying the material and cultural requirements of the population. During the postwar period, these outlays have grown substantially with the expansion of the system of educational and medical institutions, increased levels of pension security, higher wages for educational and medical workers, and so on. Defense expenditures include those involved in maintaining the armed forces of the USSR and supplying them with the necessary technical means. While implementing a policy of peaceful coexistence among states with different social systems, the Soviet Union has simultaneously adopted the measures necessary to strengthen its defensive capacity.

Expenses for government include financing the bodies of state power and administration: the supreme soviets, councils of ministers, ministries and departments, and local governmental authorities and administrations. These expenses are closely linked to expenditures for organizing production and providing cultural services to the population.

The state budgets of other socialist countries are similar in nature and functions to that of the USSR. The main source of income (80-94 percent of the receipts of the budget) is the socialist economy; foremost among expenditures are outlays for the development of the national economy (45-55 percent of all expenditures) and for social and cultural measures (25-40 percent of expenditures).

The sizes of the state budgets of the socialist countries are growing at a high rate on the basis of the rapid and planned development of their economies. For example, between 1950 and 1968 the size of the budget (including state and local budgets) of Bulgaria increased by a factor of nearly five; of Hungary, by more than 5.7; and of Poland, by nearly six. Such growth makes it possible to systematically increase the budget financing of economic and cultural development.

The state budget has played an enormous role in socialist transformations, the productive nature of budget expenditures

Table 6. Structure of expenditures of the state budget of the USSR (billions of rubles)
 19401950196019651971(plan)
 AmountPercent of totalAmountPercent of totalAmountPercent of totalAmountPercent of totalAmountPercent of total
National economy ...............5.833.515.838.234.146.744.944.277.047.9
Social and cultural measures ...............4.123.511.728.224.934.138.237.658.536.4
Defense ...............5.732.68.320.09.312.712.812.617.911.1
Government ...............0.73.91.43.41.11.51.31.31.71.1
Total ...............17.410041.310073.1100101.6100160.8100

having contributed to the acceleration of the rates of economic and cultural development of the socialist countries. The state budget serves as a means for actively influencing the growth of production, of commodity circulation, and of sources of accumulation. There has been a particularly marked increase in its role in the context of the implementation of economic reforms: the introduction of fees for funds and land (in the German Democratic Republic and Hungary); changes in the system of deductions from profits for the budget; the shift to the financing of enterprises and associations primarily by internal resources; the increasing of the role of profits in providing material incentives; the perfection of economic activity; and the augmentation of the role of credit in net investment on an expanded scale in enterprises. The largest capital investments, which are important in the realization of planned proportions in the development of the economy, are carried out by means of the state budget; thus, the role of the state budget in the general system of planning of the national economy is enhanced.

REFERENCES

Marx, K. “Biudzhet Soedinennykh Shtatov i khristiansko-germanskii biudzhet.” K. Marx and F. Engels, Soch., 2nd ed., vol. 6.
Marx, K. “Parlament: Golosovanie 26 noiabria—Biudzhet Dizraeli.” Ibid., vol. 8.
Marx, K. “Mylo dlia naroda, lakomyi kusok dlia ‘Times’—Biudzhet koalitsionnogo ministerstva.” Ibid., vol. 9.
Lenin, V. I. “Po povodu gosudarstvennoi rospisi.” Poln. sobr. soch., 5th ed., vol. 6.
Butakov, D., V. Bochkova, and I. Shevel’. Finansy stran narodnoi demokratii. Moscow, 1959.
Finansy kapitalisticheskikh gosudarstv. Moscow, 1964.
Finansy razvivaiushchikhsia gosudarstv. Moscow, 1965.
Boldyrev, B. T. Biudzhet sovremennogo kapitalisticheskogo gosudarstva. Moscow, 1968.
Gosudarstvennyi biudzhet SSSR. By an authors’ collective under the direction of V. V. Lavrov and K. N. Plotnikov. Moscow, 1968.
Sitarian, S. Khoziaistvennaia reforma i biudzhet. Moscow, 1968.

A. M. ALEKSANDROV and V. V. LAVROV

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