US Federal Finance: Growing Structural Inefficiency

Abstract

The current state of the US Federal finance system is analyzed, characterized by record absolute and relative parameters of budget deficits and gross Federal government debt. It is emphasized that the record indicators of debt and deficit objectively testify to the growing vulnerability of the US Federal finance system to external waves and shocks. Such a shock to the American economy was the coronavirus pandemic, the impact of which the United States began to feel acutely in the spring of 2020. The article draws parallels between the current crisis of the Federal finance system and the crisis of the mid-1940s. However, if in the mid-1940s, the colossal size of budget deficits and debt dependence of the United States was a consequence of the previous 15 years of the Great Depression of the 1930s and World War II in the first half of the 1940s, now the record indicators of deficits and debt of the Federal government formed in the last year or two. As a result, the usual process of ranking and establishing a system of budget priorities has been disrupted in the United States covering first of all distribution of budgetary funds between military and civilian expenditures. At the same time, a process of blurring between the parameters of "budget authority" and "budget outlays" began to occur which does not give a clear idea of the exact amount of budgetary funds allocated to the main activities spheres of the Federal government. Nevertheless, we can say that the growing financial constraints have already resulted in the stabilization of US military spending at the level of about $ 700.0 billion annually and the reduction in funding for many key programs for the procurement of the new weapons systems. There is also a growing awareness in the United States of the fact that in modern conditions many civilian programs, especially in the health sector, play no less important role in ensuring the national security of the United States in the broadest sense of the word than the actual military programs. In general, the Democratic administration of J. Biden has not yet succeeded in formulating a clear and coherent fiscal policy, which is carried out in many ways in the "manual control" mode.