Federal Deficit Research Articles

Fiscal Federalism and Challenges of National Development in Nigeria

Abstract In emerging and developmental state of Nigeria, the construct of federalism has continued to attract gamut of attentions due to its configuration and cosmetic nature. The Nigerian state since amalgamation of the 1914 and subsequent constitutional development that ushered in federalism, revenue allocations and transfers of resource control had become contending issues and debates that had propelled lingering questions on Nigerian federal practices. The witness is the persistent struggle for redrafting of revenue allocation parameters and quest for restructuring. The most worrisome is the power of government at the centre determining what constitutes revenue allocations and how it would be shared among the federating units. However, it is against this backdrop that the study appreciates the intergovernmental fiscal relations, institutions and measures aimed at controlling excesses and imbalances amongst the tiers of government in Nigeria. Methodologically, the study utilized documentary method and data were generated through the secondary sources and analyzed in content. The framework of analysis for the study was anchored on the power theory. The findings of the study had adequately revealed that components and federating units are engulfed with myriads of developmental challenges due to the nature and character of the fiscal and federal deficits. Therefore, the paper recommends the need for defined statutory role of each and culture of self reliant among the tiers of government.

The reflection of the federal budget deficit on the economic cycle in the United States of America

The reflection of the federal budget deficit on the economic cycle in the United States of America

A Sovereign Wealth Fund to tackle Climate Change in Canada

In the last few years, the issue surrounding climate change has begun to gain lots of traction globally. The 2019 federal election was a testament to its relevance in Canada, as most political parties pushed their agendas forward to tackle the issue. Plans have typically revolved around large spending promises, with little regards to the methods of financing these initiatives. Canada’s federal deficit is on the rise, and with the ongoing pandemic, the nation is approaching another debt crisis. A possible solution to the capital crunch could come in the form of a Sovereign Wealth Fund. The purpose of the fund would be to pool Canada’s natural resource profits into a fund in order to pivot the economy away from the heavy emitting sectors. The transition would encourage development in other areas, including clean energy, in an effort to reduce dependency on non renewable resources. Exploring the examples of Norway and Kuwait, Canada could model a similar strategy to improve environmental conditions, while simultaneously reducing the debt burden.

ПРОБЛЕМЫ РЕАЛИЗАЦИИ БЮДЖЕТНО-НАЛОГОВОЙ ПОЛИТИКИ В ПЕРИОД ПАНДЕМИИ

The article deals with the problems of implementing fiscal policy during the pandemic. The article considers the tools of budget policy-compensation of lost revenues and sources of financing of the federal budget deficit in the context of a pandemic.

Questions to the Domestic Practice of Inter-Budgetary Regulation in the Pandemic Situation of 2020

In the context of the development of the pandemic in 2020, the federal budget and subnational budgets of the Russian Federation were executed with significant deviations from the indicators and norms approved by the relevant laws and decisions. Certain provisions of the Budget Code of the Russian Federation were suspended. A mechanism for flexible execution of budgets has been formed. Its use led to a significant increase in budget expenditures and the federal budget deficit, despite the fact that the current law on the federal budget determined a high level of its surplus. The subjects of the Russian Federation and municipalities in the conditions of the pandemic formed a new order for additional financial resources, the amount of which was specified and changed during 2020. These circumstances affected the level of budget security of the consolidated budgets of the constituent entities of the Russian Federation and caused a radical increase in inter-budget transfers compared to 2019. To assess the effectiveness of decisions in the field of inter-budget regulation implemented in 2020, a general analysis of the conditions of legal regulation, as well as the timing and consequences of the distribution and provision of inter-budget transfers from the federal budget to the budgets of the constituent entities of the Russian Federation was carried out. A methodology is proposed and a factor analysis of the relationship between the volume of federal support and the needs of the regions in obtaining it is carried out. The results of the evaluation indicate both that there is no strict correlation between them, and that additional support was not accompanied by the setting of appropriate goals and objectives, and the timely preparation of a methodology for allocating resources. The proposed methodology for assessing the mechanisms and results of the distribution of financial assistance for each subject of the Russian Federation has shown its effectiveness and can be recommended for its application in future periods.

On Federal Deficits and Debt, Monetary and Fiscal Policy

President Biden signed a $1.9 trillion COVID relief package (the “American Rescue Plan”) on March 11, 2021. Without a corresponding increase in taxes, this plan has set off alarm bells for those concerned about the expansion of government deficits and debt. Mainstream economists have raised issues of excessive inflation, “crowding out” of private sector investment, and an unacceptable repayment burden on the young and future generations.The purpose of this paper is to demonstrate that these concerns are based on a misunderstanding of the role played by the deficit, debt, and taxes in the U.S. economy, even a misunderstanding of how certain parts of the U.S. financial system actually work. The paper explores the beginnings of paper (fiat) currency and government bonds in the U.S. and demonstrates that without federal deficit spending, the private sector would lose steam and face a recession. Without federal bonds, the government would lose a lever to control interest rates and inflation, not to mention the private sector’s loss of a risk-free, interest-bearing alternative to cash. This is not to say all deficits (or all government expenditures, for that matter) are good. Some actually do cause excessive inflation, exacerbate wealth disparity or have other harmful effects. These are serious problems and they need to be addressed effectively. Simply raising taxes in an amount to match the spending is an example of an approach with limited effectiveness.The ideal is for large spending programs to be designed to be “inflation neutral,” that is, to include federal revenues (taxes) that are specifically designed to mitigate the inflationary impact of spending, to the extent and place it is expected to emerge. If that is not possible, then increased taxes, while possibly serving political, social, or other purposes, are not the solution to address excessive spending-induced inflation.The problem is, when excessive inflation emerges, the most frequently used tool for addressing it, monetary policy, has the pernicious effect of exacerbating the hurt on the most vulnerable citizens, lower-paid workers and, especially, people of color. This paper will also address deficiencies in fiscal and monetary policies, ideally before they actually become serious.In his press conference on March 25, 2021, President Biden identified the "battle between the utility of democracies in the 21st century and autocracies" as the real threat to the United States, noting that “We’ve got to prove democracy works.” The point of this paper is that only with a proper understanding of how our financial system actually works can our leaders make the best decisions impacting our nation for decades to come.

Tax Rates Variations And Its Effect On Individual Tax Payers A Research Focussed On Salaried Class People In India

The structure and financing of a tax rate variations are grave to achieving economic growth. Tax rate cuts may encourage individuals to figure, save, and invest, but if the tax cuts aren't financed by immediate spending cuts they're going to likely also end in an increased federal deficit, which within the long-term will reduce national saving and lift interest rates. Even though, they reallocate resources diagonally toward their highest-value economic use, resulting in improved efficiency and potentially raising the overall size of the economy. The sample for the study happens to be 384 number of taxpayers. The cogent way of statistical analysis is made via ANOVA and T-test. This paper makes an attempt to explore the tax rate changes and its effect on individual tax payers.

Inflationary Impact of Funding Options for Budget Deficits in Nigeria

This paper investigates the inflationary impact of the various financing options for the federal government budget deficit which has accumulated overtime. Using Auto Regressive Distributed Lag (ARDL) methodology and quarterly data over the period 2000Q1 to 2017Q2, the study found significant relationship between inflation and the current financing options of the Government. Overall, the result of our ARDL model affirm that the impact of fiscal spending in Nigeria on inflation is captured more in the short-run since none of the variables is significant in the long-run. In addition, the use of Banking System Financing to fund government deficits has better potentials as the optimal choice because its impact on inflation is insignificant. Federal Government Bonds as a tool for financing budget deficits is also considered an optimal choice because though it causes inflation to rise by the second quarter, but its impact on inflation is expected to fizzle out in the long-run. Ways and Means Advances on the other hand, was shown to have the highest inflationary impact and as such, its use as a tool for financing government deficit should be discouraged. We, therefore, recommend a couple of appropriate policy options for financing budget deficits in Nigeria namely monetary financing and the issuance of federal government bonds. On the policy side, more efficient public expenditure management. Capital market, co-financing arrangements with pension funds and issuance of project-tied bonds, would be beneficial.

Transformation of the US Federal Budget Expenditures on National Defence for the 2017-2022 financial years

The article features a brief evaluation of the US military power based on the current level of expenses on defense. A multifaceted analysis of the structure of the US military budget and its transformation during D. Trump’s and J. Biden’s administrations is presented, as well as its potential impact on the national debt and budget deficit of the US. The article argues that military spending remained a priority in federal budget expenses during Trump’s presidency and continues to remain one of the most crucial budget priorities for J. Biden’s administration. The US reallocations of the military budget towards such expenses as “Research and Development” “Operation and Maintenance” which the Trump administration put into action allowed to continue the process of optimizing military forces to increase its combatant efficiency while limiting the burden of these expenses on US economy. The same practice is being conducted by J. Biden’s administration. The course of cutting taxes, while increasing defense spending during D. Trump lead to a 5-times increase of the budget deficit and a significant increase of the national debt, its 5 year payments will likely exceed the size of the US defense budget. The author concludes that Joe Biden’s administration is facing a challenging objective of supporting the economy's recovery after the Covid-19 pandemic and stabilizing the federal budget deficit, as well as national debt level.

Canada’s Economy in 2021: Exiting the “Pandemic” Recession

The article analyses the dynamics of the Canadian economy in 2020-2021, during the unprecedented global “pandemic” recession. It is shown that like in many other countries, the economic ups and downs in Canada closely followed the waves of the COVID-19 infection spreading across the regions and the subsequent rounds of regulatory restrictions on “high-contact” economic activities, citizens’ travel inside and outside the country, international trade, and etc. In the latter half of the 2020 several goods-producing industries showed signs of recovery which continued through the following year. However, it was only mass vaccination of Canadians in all provinces and territories that created conditions for sustained re-opening of businesses in most sectors of the national economy by the end 2021. The author looks at the internal and external drivers of recovery and continued growth. It is shown that on the whole the federal emergency plan proved to be successful in providing income support for Canadians and preventing bankruptcies among small and medium-sized businesses. The 2021 Federal Budget includes more than $100 billion in new spending over three years. It is expected that massive fiscal stimulus coupled with pent-up demand will sustain strong consumer spending after the speedy vaccine rollout allows businesses to fully reopen. At the same time, non-residential capital expenditures by private sector companies will increase only moderately in most sectors after a sizable decline in 2020. This year Canada’s resource-based industries are benefiting from the growing global demand for oil and gas, base metals, forest and agricultural products. The concluding part of the article analyses the major risks which can slow the economic recovery: the global supply-chain bottlenecks, labour market imbalances, growing inflation pressures, and massive federal budget deficit.

Доходы американских домохозяйств в условиях пандемии

Considering income is a key point for most people’s well- being, the article is focusing on the role of economic situation in the country and government policy transfers to meet American household’s expenses under pandemic. While economic trends being quite positive for the well-being of most adults before pandemic, it has become a serious problem for them during COVID‑19 stress. The economic well-being of the American households depends mainly on wages; with dividends, percent, rent income and government transfers coming by. The government programs have been of great importance for personal incomes support, but the uncertainty of the economic recovery demands to continue providing needed relief to Americans. Meanwhile continuing extraordinary budget spending for providing relief to American families and communities have turned out in the highest – since the middle of the last century – federal budget deficit. After President Biden in March signed into law the American Rescue Plan, this financial year budget’s deficit may even exceed the previous one. President Biden’s proposals may also represent important steps toward increasing tax revenues by making wealthy people to pay more fair amount of taxes on their income; raising the top marginal income tax rate, requiring. But, it would depend on changing current laws regulating taxes. The article also highlights continuing financial concerns for many households facing uncertainty of economic recovery, and especially challenges for those who lack savings, government transfers. It is pointing out that at the beginning of the Biden’s presidency the percentage of Americans who worry a great deal about hunger, homelessness as the consequences of poverty, unemployment has been rising. The financial security of the households will depend on the economic situation; the government policy to meet income declines and provide greater income stability through increased social insurance.

Book Reviews

Alberto Bisin of New York University reviews The Defcit Myth: Modern Monetary Theory and the Birth of the People’s Economy,“ by Stephanie Kelton. The Econlit abstract of this book begins: “Examines the US federal deficit and its relationship to the economy through the lens of modern monetary theory (MMT), focusing on dispelling misunderstandings about the national deficit that have shaped the public discourse.”.

The Role of Hedge Funds in the 2020 Treasury Market Turmoil

This paper provides new evidence about the behavior of hedge funds during the disruptions that occurred in the Treasury market in March 2020. In contrast to some recent policy papers arguing that hedge funds were a major amplifier of those disruptions, we show that aggregate Treasury positions held by hedge funds were far too small to be the main disruptive factor. Moreover, we find that a range of parties, especially non-US official institutions, sold Treasuries as they sought to lock in US dollars in cash. The hedge funds implementing the Fixed Income Relative Value strategy behaved in a way that was consistent with market expectations as they faced challenging financing conditions when banks abruptly withdrew from funding their positions in the repo market. Overall, this evidence also highlights important vulnerabilities of the Treasury market. Since the last financial crisis, exploding federal deficits led to a significant increase in the stock of marketable Treasuries which outstripped the capacity of dealers to safely intermediate the market on their own balance sheets.

Who is Afraid of the Big Bad Debt? A Modern Money Theory Perspective on Federal Deficits and Debt

The U.S. federal government's deficit is expected to grow to over one trillion dollars in fiscal year (FY) 2020, and the national debt held by the public will likely grow to over $16.7 trillion. Budgeting scholars in the field of public administration have expressed concern over the increasing debt levels. The field of public administration, however, is largely unaware of Modern Money Theory (MMT) and the mechanics of money, which is its focus. MMT argues that understanding the mechanics of money in the U.S. financial system should lead scholars to different conclusions regarding the debt and deficit. This article presents the core arguments of the MMT perspective in this regard, with the goal to trigger further debates about debt and deficit among the community of budgeting scholars.

Balance of the Federal Budget

The article is devoted to the problem of balancing the budget from the point of view of the form of implementation of the principle of building the budgetary system of the Russian Federation and the state of the federal budget, provided that all its expenses are covered by its revenues. If income is insufficient, a budget deficit occurs. The research methodology provides for a comparative analysis of the concepts and content of budget balance, tools for its provision, the main directions of budget policy and solutions to strategic problems. The result of the study is the proposals for assessing the balance of the budget to cover the deficit and the need for sources of financing the budget deficit. The formulated recommendations are focused on the optimisation of income, expenditures, the formation and use of budgetary reserves, public debt management, as well as effective regulation of intergovernmental fiscal relations. The federal budget deficit is subject to regulation in the direction of its reduction, for which the instruments for balancing it and priority directions for the activities of the financial bodies of the Government of the Russian Federation have been determined.

Macroeconomic news and treasury futures return volatility: Do treasury auctions matter?

Various macroeconomic announcements are known to influence asset price volatility. In addition to non-farm payrolls, we highlight the importance of Treasury auctions – a news event that has grown in importance due to ongoing Federal deficits. The occurrence of an auction, which increases supply in the underlying cash market, pushes futures prices lower and volatility higher. Conversely, a higher bid-to-cover ratio, indicates greater demand for Treasury securities, increases Treasury futures prices and lowers volatility. The response is consistent with market participants using futures to manage inventory risk. The results are consistent across a set of volatility estimates, and in an alternate conditional volatility framework.

Unemployment after the Great Recession: Why so High? What Can We Do?

The surprising increase in U.S. unemployment in the Great Recession and the persistence of long-term unemployment in the economic recovery pose important questions for employment policy. Why did unemployment grow more than forecast? Is the character of long-term unemployment the result of cyclical or structural causes? I discuss eight policy changes that would reduce the ranks of the unemployed and that would improve the efficiency of the labor market. Most of these proposals do not add big-ticket items to the Federal budget; their merits are independent of the question of how large the federal deficit should be at this time.

Sovereign Wealth Funds: Russian and International Experience

Taking the Russian and the International experience, the principal aim of this study is to analyse sovereign wealth funds critically. It remains well known that the Russian National Wealth Fund is vital in the macroeconomic policy of the Russian state. After the abolition of the Reserve Fund in 2018, the Russian National Wealth Fund has to solve a wide range of tasks. In this context, one can argue that the sovereign welfare fund is a specialised monetary fund used to stabilise the state budget when government revenues decline. The welfare fund is also used to finance government needs in the long-term period. The role of sovereign wealth funds is growing in the world. They accumulate large amounts of financial resources. Sovereign wealth funds are founded in such countries where the budget strongly depends on market factors. In most cases, these factors are global commodity prices. The funds’ money is used to cover the deficit of the relevant budget in case of unfavourable market shifts. In the period of high commodity prices, the fund accumulates an excess of export earnings. Against this backdrop, the key purpose of the study is to evaluate the efficiency of managing the National Wealth Fund in the Russian Federation. The study was carried out using the methods of synthesis, analysis, economic analysis, as well as graphic methods, and the methods of comparisons and analogies, which in turn helps in evaluating the extent of efficiency of managing the Russian National Wealth Fund.. The research findings can be used when developing an investment strategy (investment portfolio) of the Russian National Wealth Fund, through which it can aim at balancing the insurance pension system, financing of the federal budget deficit, and co-financing of voluntary pension savings. In this regard, it is imperative for the fund to perform in productive investment activities.

Get Cash to More Families that Need It Now: Give Banks More Discretion to Make Home Equity Loans and Refinance Mortgages

The economic dislocations caused by the coronavirus pandemic will almost certainly result in economic contraction. There have been calls for bold actions to attenuate the effects of this contraction and also to provide cash for struggling Americans whose incomes may be temporarily disrupted. But these actions, including direct cash payments to American households, will add to the federal deficit, and recent large fiscal deficits have tempered enthusiasm for immediate large federal outlays. The pandemic will lead to a deep contraction that hopefully will be short. The more that national consumption can be smoothed during this time, especially for households that experience the largest temporary hits to their incomes, the quicker the recovery will be. There may be a way to allow American households to help themselves through this period and to lessen the need for more federal spending—by easing some of the restrictions on mortgage lending, to allow Americans to access their single largest asset: their homes. The nation is in the midst of an emergency, desperate for liquidity and for current sources of secured spending. It is worth considering the value of tapping this source of liquidity.

Bad Medicine? Federal Debt and Deficits after COVID-19

The government’s response to stem the pandemic has resulted in an erosion in public finances.