Fiscal Policy: Expanding The Scale Of Government Debt Issuance And Massive Tax Reduction

The essence is "surplus", which is manifested by mismatching of production and demand.

If we do not solve the problem of excess capacity, we will not be able to get out of the crisis.

We have been shouting for capacity for many years, but from the macro and micro indicators, the capacity of traditional industries is far from complete, or even not fully started.

The most obvious indicator is the price of industrial products.

PPI has been negative growth for 43 consecutive months, far exceeding the last 31 months of the capacity cycle.

Once more than 5000 yuan / ton of rebar now fell to less than 2000 yuan, an average of less than 1 yuan a catty, the real price of cabbage.

If you can't see the PPI touch the bottom, if the steel is still selling cabbage, it shows that there is a long way to go and the economy can't go out of the crisis.

Nominal "active fiscal policy" is not enough "active" at present. Its root lies in the constraint of fiscal and taxation system.

There are two major problems in fiscal and taxation system: one is money shortage, the other is money can not be spent.

The lack of money is because the financial revenue during the economic downturn is greatly restricted, and the central government has low tolerance to the deficit rate. The money can not be spent because the financial relationship between the central and local governments has not been smooth. The degree of freedom of local governments is relatively low, and there is no enthusiasm to spend money.

To solve these two problems, we need to expand the fiscal deficit on the one hand and adjust the financial relationship between central and local governments on the other hand.

From the perspective of the central government, special treasury bonds and special treasury bonds can be issued.

Whether it is special treasury bonds or special debt, the central government acts as an additional lever to make use of idle funds, or to supplement the capital of state-owned commercial banks (for example, in August 1998, it issued 270 billion yuan long term special treasury bonds to four major state-owned banks, all the funds raised were used to supplement the capital of wholly state-owned commercial banks), or directly used for public investment (for example, the Ministry of Finance issued 10 year treasury bonds with 100 billion interest rates and 5.5% annual interest rates for four major lines in September 1998, which is earmarked for special purposes).

And infrastructure investment needed for social development is an effective way to stimulate broad money to expand credit.

From the current situation, the central government can issue special treasury bonds, docking some infrastructure projects that need central leadership, such as pportation, water conservancy, shanty towns pformation, underground pipe network and so on.

We should increase support for infrastructure construction and infrastructure construction in the central and western regions.

This year's 600 billion special financial bonds issued by CDB and agricultural development bank, central government discount interest, for urban infrastructure construction, in fact played the role of special treasury bonds, can be used as a pitional tool to continue to expand the scale.

From the point of view of local governments, we can enlarge the main gate, raise the amount of local debt issuance, and reform the supporting system.

We must open the main gate after blocking the gate. The cost of local government bond financing is low, and there is no time mismatch problem. We should expand the scale appropriately for some valuable infrastructure construction.

At present, most of the local debt is used to replace the stock. In addition to 3 trillion and 200 billion of the local replacement bonds, the issuance amount of local government bonds in 2015 is only 600 billion, while the scale of municipal debt in the United States is close to 2 trillion. The next step should be to release more local debts for incremental projects.

Of course, supporting reforms must be promoted at the same time. For example, the fiscal pparency of local governments must be improved, and the balance sheet of local governments should be compiled and disclosed as soon as possible.

Step by step, if the reform is slow, it can continue to be replaced by the central authorities.

Large scale tax reduction is from the end of the income tax, compared to the expenditure side.

Tax cuts can avoid the distortion of resource allocation caused by fiscal expenditure.

In addition, tax cuts and other fiscal incentives can expand aggregate demand. First, tax cuts help to increase marginal income of workers and enhance their enthusiasm for work. Second, increase marginal returns of capital and increase entrepreneurs' investment in fixed assets and investment in research.

The increase in labor, capital and scientific research will increase the total output of the three groups.

Third, from the demand side, tax cuts have increased the disposable income of the residential sector, while the residential sector is more efficient than the government.

The core of Reagan economics's response to stagflation is massive tax cuts.

In 1981, the Senate and house of Representatives passed the economic recovery tax act. President Reagan's tax cuts began as the largest tax cut in US history.

Reagan's tax cuts mainly include lowering the rate of individual income tax, indexing personal income tax and accelerating depreciation of fixed assets.

Tax cuts stimulated consumption and investment in new equipment: (1) the rate of personal consumption expenditure on GDP rose rapidly from 0.86% in 1982 to 3.54% in 1983; (2) the actual investment in new factories and equipment increased by 15.4% every year since 1982, which has not been faster since the end of World War II.

In 1984, the US GNP growth rate was 6.8%, the highest growth rate since 1954.