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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

or Who is divvying up the pie and how

16 November, 1999 - 00:00

On November 4 Verkhovna Rada set to work on one of its most important constitutional tasks, deliberating the 2000 state budget bill. Unfortunately, the first try proved abortive; the first reading did not pass, and a second was scheduled two weeks later. But perhaps unfortunately is less the word than fortunately.

Numerous commentaries following budget hearings offer detailed explanations of the bill’s perilous passage through Parliament, including tax income rates, understated for some and overstated for others, budget expenditure items that satisfy no one, and dirty games being played around the national purse — in a word, the same pack of arguments that every Ukrainian citizen knows so well. However, Ukrainians are also well aware that the annual budget sallies and battles have never resulted in adopting a good budget. It is also true that Valentyn Symonenko, Ukraine’s budget comptroller as head of the Accounting Chamber, is not likely to agree with this; he is confident that most previous budget programs were normal and were bungled by the unlawful “privatization” of budget money by the lawful managers of that money. Thus budget debates have left no one unconcerned. At the same time, all those defending “their” budgets and attacking those of others, being nominally in the right, leaves no chance for an unbiased judgment on which of the two budget bills (Parliament’s or Cabinet’s) is best for Ukraine. In part this question can be answered by answering another question: What tasks must a given budget solve, proceeding from a specific understanding of the public good? This author believes that both drafts set similar tasks and have distinctions. In both, the constitutional implementation of social obligations by the state is a priority, even if a forced one, as is the support of stagnating industries, although this one is not so much a constitutional as a mental priority. So much for their similarity.

As for differences, two things come first to mind. The parliamentary draft, prepared by the budget committee, is a deadly enemy of the managers of profitable enterprises, because competent Yuliya Tymoshenko proposes to withdraw the lion’s share of 15 billion hryvnias “additionally procured” as the Red managers’ and their political guardians’ “rent.”

The Cabinet, of course opposes this adamantly; those in power are strong precisely because of the support of those two categories of fellow citizens; the regime has nothing to pay with except that “rent” resulting from the management of public property.

The second distinction concerns their attitudes toward debts. Here the Cabinet all possible praise, although few if any believe that it is completely honest. Yet its stand is quite civil and mature. The sad fact remains that more often than not money is enthusiastically borrowed and never paid back in Ukraine, and that this is generally regarded as a demonstration of wit and not otherwise as in the outside world. Incidentally, that world gives the national budget an altogether different meaning, because it reflects totally different notions of “public good.”

Economic theory has it that the state budget is a powerful lever of influence affecting a given country’s economic progress. In other words, Parliament and the Cabinet, by correctly applying this lever, can revive a stagnating economy and make it grow or dampen down an overheated one. From the above summary of budget debates it follows that there is no question of our budget being a factor of economic growth (growth in terms of goods and services). Instead, lances are broken over wages for budget-sustained employees and workers of dying enterprises, and nothing about the possibility of developing profitable production. The fact that the participants in the planning process do not understand the laws of macroeconomics does not deprive the budget of its ability to influence economic growth in general. Evidence of this is the fact that government interference in the economy (via the budget) turns out to be the biggest obstacle to renewing this growth.

However, while economic growth as an objective is missing in both draft budgets (and the presence of such built-in regulators is no secret to economists), does this really mean that of the two evils the lesser cannot be chosen? Not really. The experience of the past several years shows that the lesser evil is reducing the presence of ignorant officials controlling the economy. Thus, the smaller the budget the better for us all. Unfortunately.

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