Fiscal Strategy (2013)

The fiscal policy plays a major role in the governmental policies implemented to achieve the main macroeconomic objectives, such as for example a high level of labor employment, a high rate of economic growth, price stability, neutral balance of payments etc., using specific tools also known as fiscal leverages. One can speak of a dual dimension of fiscal policy within an economy: the classical one , regarding the share of tax revenues in total resources, and the interventionist dimension reflecting concerns about the impact of fiscal policy on economic and social level. The latter is seen as increasingly important, beacuse in the current economic crisis context , the fiscal policy role is a crucial one. Now, more than ever, the government intervention can be critical. However, without financial resources, the state interventionist action is questioned, and thus the fulfillment of the main objective: economic stabilization. I support that in this period of economic crisiss, the proper way for the government to take action would be an expansionary fiscal policy. This would involve tax reduction or increase of public spending in order to protect or encourage certain economic sectors. In the case of Romania such measure was not adopted and instead developed a pro-cyclical behavior. I recommend this kind of action only when there is a low level of public debt, which is not the case of our country, mainly due the growth rate of public debt. For instance, if the policymakers manage by 2013 to diminish the public debt issue of arrears, then I would say they could adopt a pro-cyclical fiscal policy. Consider the expansionary fiscal contraction hypothesis in 2013. In these conditions the state expenditures reductions will ensure fiscal consolidation sustainable and reduce expectations of a possible increase in taxes. Real interest rates will decrease, which will stimulate consumption, investment and long-term production. Expectations for credible tax reduction will cause an increase of permanent income, which will increase the level of private consumption. If policymakers prefer to cut public expenditures in order to ensure fiscal consolidation, the households can anticipate these future tax reductions and certainly this will lead to an increase in demand, alleviating the recesionist influence of fiscal contraction. by solving the

Probably an ideal tax system for Romania would be one characterized by higher public revenues and lower public expenditures, but that does not mean that I support this idea. It is normal that fiscal decisions take into consideration the welfare of the population. Firstly, I think further that Romania should restructure the public expenditures by diminishing some classes. This process should target especially wage costs, spending on goods and services, expenditure on social assistance. In terms of wage costs, should they shrink due to reduced staffing in the public sector by maintaining the rule "1-7". Also necessary for the future is the reduction of social assistance costs through a new social code to rationalize the number of social programs and directs them to the most vulnerable. Secondly, the restructuring process of public expenditures, upward allocations for certain categories, should target particularly investment expenditures, subsidies and state aid, in order to support the business.However, it is recommended that the support of investment expeditures is done parallel to careful monitoring of their effectiveness, efficiency and the social utility. On the other hand, in terms of public revenues to the state budget, I suggest the following as key measures for 2013: gradual reduction of the excise increase and increased absorption of EU funds. Let's not forget one of the most important proposals for an ideal tax system in 2013: the return to the progressive tax rate. Indeed, a flat tax is easily understandable by the population and easily for public authorities to manage it, but this kind of tax increase the population income inequality and does not follow the horizontal fiscal equity. It should be noted that, regardless of context, fiscal policy is only one component of financial policy, respectively, of the economic.Therefore, fiscal policy can not, by itself, solve the issues created by the malfunctioning of the economy and nor have the potential to sustain the macroeconomic stability, in terms of rising unemployment and a high rate of inflation. Ideally, the state should create the prerequisites for sustainable economic growth, by improving the business environment and reducing macroeconomic imbalances. Obviously this can not be achieved solely next year. It must be remembered that fiscal measures are not that "fast", and the results appear much later. It requires that measures such as budget and fiscal levers have to be complemented by the monetary policies to meet macroeconomic targets.