THE WOODWORM OF GOVERNMENT EXPENDITURE

THE WOODWORM OF GOVERNMENT EXPENDITURE

Among the trends of the last ten General Budgets, the increase in government expenditure along with the consequential necessity of raising taxes stands out for its volume and repeated continuity.  These substantial increases in collection have not been enough to level off expenditure, meaning that, also with obstinate repetition throughout the period, public sector deficits have been customary year after year.
If we only take into account, with the object of homogenising data, the figures budgeted as state government expenditure, we notice that the trend preceding the budgets of 1983 not only is consolidated , but increases.  From the 4.51 billion budgeted for 1983, it passes to 8.02 for 1987, concluding the sequence with 23.7 budgeted for 1992 and 26.01 for 1993.  During these ten years the figures budgeted for state expenditure have multiplied remarkably.  Furthermore actual expenditure is recently significantly greater than that budgeted.
The inertia of government expenditure these years can be presented as a paradigmatic example which fulfils practically all the theories elaborated to explain these phenomenon.  These range from the already classical Wagner’s Law to the theories of the interest groups of Buchanan and Tullock; passing on to the explanations that attribute the principal cause to the political cycle; or those that focus attention on income redistribution; or, finally, those who explain it by the theory of decentralisation of political power, especially applicable in Spain to the conduct of the autonomous counties and district councils.
The criticisms about the problems that this trend of Spanish fiscal policy brings have been repeated over and over again by different personal and institutional forums, both national and international.  The persistent public deficits end up generating inflation and, with it, a stream of generalised prejudices.  These prejudices are generated in different areas; in export competitiveness, in saving, among receivers of nominally fixed incomes or with low flexibility on a rising market, in the making of stable economic decisions in the medium and long term, in the stability of the value of money (imperative requirement in a modern economy if one wants to reach greater heights of development), in the necessity of maintaining high rates of interest in order to finance an increasingly large debt,…etc.
These deficits oblige the State to put pressure on private savings.  The private sector is also claimant of these savings, but the more tempting offer of the State, following the ratios of security-risk-return end up displacing the private sector, so that it is difficult to deny its decisive influence on the expulsion effect of investment.
The burden of correcting inflation has been borne exclusively by monetary policy,  raising interest rates.  Having recourse to an incomes policy has been attempted but with little success.  In any case resorting to fiscal policy adjustment has been rejected repeatedly.  This is giving rise to another consequence of effects: the increase in financial costs for companies, with its negative influence on investment and, consequently, on occupancy level (the great drama of the Spanish economy).
The excessive increase in the volume of government expenditure gives rise, in short, to a greater State representation as opposed to that of civil society; individual resources and incentives are subject to bureaucracy; the innovative and creative multi-variant efficiency of personal decisions is paralysed; capacity of work and the entrepreneurship of citizens are numbed by what encourages, on the contrary, leisure, consumption and a demanding spirit from the population. The illusion of security finally has priority over the creative power of risk and business-oriented ventures.  The search by the state of ‘well-being’ has paralysed the state of ‘well-doing’.  Here we are.  Now the most difficult is lacking: react with resolution and intelligence.

JJ Franch Meneu.