Public Finance: State, Economy, and Resources

Public Finance

• Public finances help evaluate the health of the State
• The State is a community of individuals fixed on a territory and benefiting from a particular social organization
• The State is considered sovereign
• The origin of any state has three main missions: ensuring citizen security, render justice, minting money and levying taxes
• Public finance constitutes a barometer of maturity and health of States
• In an unhealthy state, governments encounter difficulties in controlling public finances because resources tend to fluctuate and are susceptible to corruption
• In liberal democracies, public resources will lead to a reliable forecast analysis, and public spending has a more important social dimension

Importance in the Economy

• The importance of public finances is linked to understanding the economic functioning
• Any economy can be analyzed as an interaction between 3 actors: the State, companies, and households/individuals
• Companies are economic actors whose function is to produce goods and marketable services
• Companies are responsible for economic growth of the country and hire employees, invest, and sell their product to generate a profit
• Households have two main functions: they exchange their labor for salary and this revenue is then used for consumption/bets
• Household consumption is the key element for the functioning of the economy since, the more households consume, companies will be profitable and more inclined to produce more
• The State occupies a central role in the economy as it has a triple role: regulator that regulates functioning of markets through competition law or labor law; producer through public expenses that allow the creation of goods or non-market services; redistributor of wealth plays a role of redistribution since it levies taxes on the income of households or the profits of companies and redistributes these resources to reduce economic inequalities
• There are permanent economic flows between these 3 actors that obey the law of the market
• The economy is subject to economic cycles characterized by phases of growth followed by phases of contraction
• The phase of growth is characterized by a rise in investment by companies, allows for supporting a rise in employment and consumption and thus in GDP, and therefore provides public resources
• When growth is high, resources will also be elevated
• This growth is not timeless since, following a strong investment phase, the companies will have more difficulty in generating profit, which will slow down production and wage increases
• In the worst-case scenario, this can lead to a phase of recession
• Recession: an economic production phase decreases over two consecutive quarters
• During a recession, there is a systematic increase in unemployment and decrease in public finance resources
• The causes of the cycles are multiple - The war in Ukraine, and rising energy prices
• The State plays a crucial role in management of economic cycles. Through the public finances, governments reduce government spending to reduce the financing needs of administrations, which results in a decrease in taxes and support for businesses and households
• In the management of economic flows, States are supported by central banks, especially the European Central Bank, which can implement specific monetary policies, either to support the economy (by lowering interest rates of loans) or to reduce inflation risks (by increasing interest rates and curbing capital creation)
• The State plays a role in the management of crises, and public finances also reflect a certain political conception of the economy and statistics
• There has been a change in the distribution of wealth created by the three major economic actors, over the last 20 years
• In 2000, businesses and the banking sector created over 60% of wealth, households created 19.5% of resources, and public administrations created over 20% of wealth
• In 2019, households still create approximately 20% of wealth, however the balance between the State and businesses has been modified: businesses now create 63% of wealth and public administrations 17%, which is a decrease in national wealth

Importance in the Economy today

• These figures are explained by the good health of French companies, but also by a certain withdrawal of public administrations from the functioning of the economy or at least an inability to keep up with the growth in the private sector A paradox exists between the constant increase of public expenses and the pauperization of public services
• The importance of public finance is also linked to current events
• At the end of each calendar year, initial finance law and settlement law is voted
• These two laws make it possible to understand and anticipate public expenses and revenue, and verify how public credits were spent throughout the year
• Public finances, is being capable as a citizen of understanding budgetary choices made by the government.

Introduction

• Essential definitions relating to public finance: Competing definitions of public finance
• Authors agree to divide it into 3 fields: Budget law - the rules relating to the preparation and control of the execution of public budgets, accounting: the accounting rules that govern the execution of operations, tax: law relating to the collection of taxes
• Public finances are also interested in monetary policy issues, which is the economic
• Material Definition : what are we talking about
• Public finance law is primarily built as a State finance law
• It is closely linked to the originating act of public finance law, the Magna Carta of 1215, which conditions the collection of taxes by the State
• Public finances have expanded as the missions of the State have been expanded with new public actors, such as a local authority or social security.
• Today, in its strictest sense, the organizational scope of public finance is defined by standard accounting practices
• Public finances are the finances of public administrations
• Public administrations: they include central public administrations (the State and its public institutions or universities), local public administrations (local authorities) and social security administrations (social security or pension organizations)
• EU finances are also included
• Two massive budgets: State budget (550 billion euros) financed by taxes and the Budget for Security (550 billion euros) financed by taxes. The other half is financed by social contributions, a levy intervening directly in the income or in the company that gives a specific right in relation to security
• The Social Security funds don't only cover healthcare expenses with a link to job security

Budgets

• Public finances, in a broader sense, also refer to the finances of the public sector, encompasses but goes further, because it also includes the finances linked to public companies (SNCF), i.e., companies over which the State exercises significant control. This refers to the hypothesis where the State is a majority shareholder or a minority shareholder with significant influence Certain authors will also include the finances of the public economy, i.e., the finances of private organizations that manage private funds but are under the control of public power. This refers in particular to foundations recognized as being of public utility, such as the restos du cœur or the Louis Vuitton foundation

Origanic Definitions

• Definition: Public finances can be defined by referring to public administrations making it necessary to establish and define two new criteria: All finance is predominantly generated by "compulsory levies" A specific term referring to a charge; The amount is fixed unilaterally by the public authority which does not give rise to direct or immediate compensation in the form of a service. They include taxes such as revenue taxes of the individual. Taxes are considered fees like the collection of waste removal, social security contributions, and other forms of revenue. Public administartions are also know for their non-market activities contrary to private sector companies where there is no purpose to generate profit or seek profitability but satisfy a general interest; Services or industrial and commercial (SPA, Spice). Public Finances is defined as the finances of different institutions, public which conduct a non-market activity and are financed by levies. The presentation of expenses are delayed. Eric Coquerel, and Charles de Courson retrieve ceiling letters, Barnier refused letters from C.

Budget

• The first definition of the budget, from a decree, states that budget is the act by which receipts and expensenses of the State is adopted The definition continues through the times, a similar definitions is found to be in article 6 which relates to the laws of public finance. "The budget describes revenues expenses for the year"
• Three characteristics of the budget are as per the definition: Act of forecasting can cause errors, Act of authorization can change depending on if the functionary is still being paid. It can also have programming and an annual act where you vote the law, the sector can have the budget and the sector can decide it doesn't want any
• Law of finance and organic relative a budget is organic when its adapt the two Chambers of of power and has obligatory soumission from the constituional which was signed the 4th October of 1958

Constitutional Laws

• Art 47: The parliament votes financial projects
• Same precision laws of the social security
• Rules of finance of local territorial's
• Three laws are usually identified the constiution of France
• State law which defines for the nature and amount of resources and allocation of state charges
• Laws determine economic equilibrium, objectives of the program
• Aspects part, in fixing the states budget, translates the general expose for public finance has had the presentation regarding to evolution past and futures. They reveal the admin that relates to the choices for each financial there is laws that are rectifives what modifies the new fisca (ex ecological bonus costs so much) as financial, procede comptabilies
• laws related then it determinate the montante and the date as current

Three Main Sources

• Tax added: representing almost 29% off all fiscal
• Impose by revenue for the persons phisique , almost representing 27% of fiscal
• Taxes from companies its almost elevated from 72 to fiscal

Expenses of State

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French Financial Cultural

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