Budgetary Position Research Articles

The Budgetary Impact of Privatization

This paper reviews the widely held notion that privatization, particularly of enterprises that are incurring losses, improves budgetary prospects. It is argued that unless significant efficiency gains are realized and captured by the budget, privatization may in fact worsen budgetary prospects over the medium term. To ensure durable improvements in the budgetary position, policymakers should ensure that privatization is accompanied by deregulation and increased reliance on market forces.

MACROECONOMIC POLICY AND TRADE LIBERALIZATION: SOME GUIDELINES

Appropriate conduct of macroeconomic policy can play a crucial role in the success of trade liberalization. At a given nominal exchange rate, a trade liberalization that significantly reduces tariffs and quantitative restrictions on imports normally implies a reduction in the general level of domestic prices and wages, especially in the import competing sector. To diminish recessionary effects of domestic price and wage deflation, it is often appropriate to devaluate a country's currency in conjunction with a major trade liberalization. Monetary policy needs to be consistent with exchange rate policy, avoiding both restrictiveness that might induce recession and excessive ease that would fuel inflation and force future devaluations. Since trade liberalization can induce a short-run deterioration of the government's budget position, fiscal policy needs to remain restrained in order to limit the dangers posed by large government deficits. Wage policy should be directed toward facilitating adjustments in relative wage rates and credit policy should assume that adequate credit is available to finance expansion. Finally, government policy should avoid large balance of payments deficits.

The Determinants of Defence Expenditure in the ASEAN Region

This article attempts to determine the extent to which domestic economic conditions have influenced le vels of defence expenditure in five ASEAN countries since the early 1960s. Whilst aspects of data qua lity preclude a precise conclusion, it seems that domestic economic forces do exert at least a moderate influence on defence expenditure. Defence expenditure in the current year was positively related to de fence expenditure in the previous year, and to the government's budgetary position in that year. The ba lance of payments position exerted a strong indirect influence through its effect on government revenue. Given its personnel component, defence expenditure appears less prone to cutbacks than some other government expenditure categories in the face of overall government expenditure reductions.

Gamma Ray Observatory survives

Right now the budgetary position of NASA science projects for fiscal year 1982 is shaky, outside of the Space Shuttle Program. Two scientifically crucial missions being planned are the Gamma Ray Observatory (GRO) and the Venus Orbiting Imaging Radar (VOIR). President Reagan's proposed budgetary cuts have left both programs intact but delayed. For FY 1982, GRO will be able to continue at only 15% level—‘about enough money to keep the papers shuffling,’ according to a NASA official (Science News, Mar. 14, 1981). Nonetheless, the importance of planning the GRO mission, now scheduled for a launch date in 1988, has prompted the selection of instruments as follows:

Bureaus, Clients, and Congress

Richard Fenno, in Power of the Purse, contends that the budget process responds to interest group pressures. This study examines that hypothesis for 20 bureaus in the Department of Agriculture for the fiscal years 1971-1976. Cultivating clientele support both among interest groups and members of Congress appears to aid a bureau's budget position. Bureaus with strong support not only avoid budget cuts but grow rapidly from year to year.

Estimates of the High-Employment Budget and Changes in Potential Output

One of the more novel approaches to the problem of assessing the impact of the Federal budget on economic activity was the development of the concept of the high-employment budget. The purpose of this concept was to standardize the budget position on some high-employment norm amid thereby remove the effect of variations in economic activity on the measured budget surplus or deficit. Proponents of the high-employment budget argue that estimation of the Federal budget at an assumed full—employment level of activity provides a better measure of tile impact of the budget on the economy than the actual surplus or deficit.

Some Estimates of the Full Employment Budget Position for the Australian Economy

Some Estimates of the Full Employment Budget Position for the Australian Economy

On Measuring Fiscal Performance

PpT HE purpose of this paper is to appraise the cyclical performance of fiscal policy over two recent cycles ranging from 1957-3 (peak) to 1960-2 (peak), and from 1960-2 to the first quarter of 1963. Also, an attempt is made to appraise the full employment adequacy of fiscal policy over this period. The exercise shows that grading, as always, is a delicate matter and that the results will differ depending on what formula is used. The effectiveness of fiscal policy is not easily measured. Obviously, it cannot be demonstrated by searching for a simple association between budget deficit and prosperity, nor can its ineffectiveness be proven by showing deficits to be associated with declines in GNP.1 What matters, first of all, are changes in budgetary position relative to changes in GNP. Moreover, a distinction must be drawn between the built-in effects of changes in GNP on changes in fiscal position, and the effects of discretionary changes in fiscal parameters on GNP. The former relation, which dominates the picture of the last decade, leads to the observed positive association between change in GNP and the level of budget surplus. This association in no way disproves the proposition that the built-in increase in deficit dampens the decline in GNP, just as the built-in increase in surplus dampens the rise. The effects of discretionary changes in fiscal parameters, in turn, should lead to a negative relation between changes in GNP and budget surplus, but this relationship involves lags and is not easily read from the data. Ultimately, the only satisfactory way of measuring the effects of budget policy on GNP during a past period is in terms of an econometric model which isolates fiscal factors. No such attempt will be made here. Rather, we shall compute various overall indices of fiscal performance, based on a more or less simplified multiplier model of fiscal policy effects, and address ourselves to certain conceptual problems which they pose. Our concern will be first with the contribution of fiscal policy to cylical stability, and then with measures of its full employment adequacy.

Intergovernmental Committee for European Migration

Eighth SessionThe eighth session of the Intergovernmental Committee for European Migration (ICEM) was held in Geneva from November 30 to December 4, 1954. With the opening of the session, the Constitution entered into force, the required sixteen ratifications having been deposited by Argentina, Australia, Austria, Canada, Chile, Denmark, German Federal Republic, Greece, Israel, Italy, Netherlands, Norway, Paraguay, Sweden, Switzerland and the United States During the session, Costa Rica deposited its instrument of ratification. A final revised budget and plan of operation for 1954 was approved which provided for the overseas migration of 119,261 persons at a total cost of $48,782,776, as compared with $25,855,416 in 1953 to move 143,420 persons. On the recommendation of the Director of ICEM (Gibson) a budget of $46.5 million was approved for a 1955 program to assist the movement of 143,420 persons. Problems of the future budgetary position of ICEM were discussed at the meeting; a member of the United States delegation (Jensen) warned the meeting not to assume “that the Committee may go on indefinitely with a higher budget each year than the year before, unless the Committee can increase each year the proportion of its operations that are on a self-reimbursable basis”. Various proposals to meet the expected budgetary deficit of $1.8 million in 1955 were discussed. The Director proposed that part of this sum could come from token prepayments by emigrants or partial reimbursement after settlements. Other delegations, including the Netherlands, opposed the principle of payment by emigrants and proposed as alternatives either that countries in which ICEM made contributions to the national income through contracts for shipping or other services repay ten percent of these amounts (an estimated $1.5 million in additional income) or that each sending and receiving country pay an additional $10 per migrant moved (an estimated $2.5 million).

Imported Books in Australia

EARLY this year (NATURE, Feb. 20 and April 2), we commented on the unfortunate effect on scientific and educational progress in Australia likely to be produced by the primage duty and sales tax on books, periodicals and magazines. We welcome, therefore, the announcement made on November 10 in the House of Representatives by Mr. Lyons, the Prime Minister, that these taxes are to be abolished (Sydney Morning Herald). They were introduced, with much other taxation, as part of the emergency measures necessary to meet the financial situation in Australia. A duty of 10 per cent on imported books and a sales tax of 6 per cent, together with the depreciation of Australian money, was clearly a heavy burden for scientific workers and others anxious to keep abreast of the times to bear, and an influential deputation waited upon Mr. Lyons asking for the remission of these taxes. As we pointed out at the time, and also when the Import Duties Bill proposing a duty of 10 per cent on goods imported into Great Britain was before the House of Commons, the revenue to be expected from the taxation of scientific literature in particular is negligible; such duties increase the cost of research and thereby hamper progress. Now that the budgetary position in Australia has improved to the extent that reduction of taxation can be considered, we are glad to find that the abolition of the primage duty and sales tax on literature is in the first group of measures brought forward.