Recession and Tax Reform Characterize Federal Budgets 1993 and 1994
In 1993 the federal government attempted to counter the effects of recession. As a result the preliminary net deficit has risen to AS 98.2 billion, amounting to 4.7 percent of GDP. For 1994 a deficit of AS 80.7 billion (3.7 percent of GDP) is anticipated. The government intends to resume its course of deficit reduction. In the budgets of 1993 and 1994 a number of structural problems exist which will make consolidation difficult. In 1993 tax receipts fell significantly below expectations. For the first time since the end of World War II federal net tax receipts (AS 339.1 billion) were lower (by –0.3 percent) than a year earlier. At the same time fast rising unemployment required higher expenditures. As a result, the deficit at the end of the year was 50 percent higher than anticipated in the budget proposal (AS 98.2 billion, instead of AS 64.1 billion). More than two thirds of this increase are due to the recession. The budget proposal for 1994 is marked by contradictory tendencies. On the one hand, the federal government is attempting to reduce the net deficit and revert back to a course of consolidation; on the other hand, the need to increase social expenditures (unemployment insurance, family-related expenditures) as a result of the cyclical situation will hinder this attempt. In addition, the second stage of the tax reform 1994 will reduce tax receipts, stabilizing the cyclical situation as well. The budgets of 1993 and 1994 contain a number of structural problems which will make budget consolidation in the future difficult. In 1994 for the first time a number of welfare state expenditures (unemployment insurance and family burden compensation fund) will have to be financed by loans, as tied receipts will no longer cover expenditures. Also the new provision of caring for the disabled will require additional funds. In 1993 per capita civil service wages once again increased faster (by 5.5 percent) than had been expected due to the official wage settlement of 3.95 percent. This additional wage movement impedes future budget consolidation. While federal government investment expenditures had been sharply reduced in previous years, contributing significantly to deficit reduction, they have been increased both in 1993 and 1994. These increases act to stabilize the cyclical situation and simultaneously lay the groundwork for positive future growth.
Bundeshaushalt 1993 und 1994 durch Steuerreform und Konjunktureinbruch geprägt; Recession and Tax Reform Characterize Federal Budgets 1993 and 1994
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