Medvedev tries to cut defense spending

On Monday, July 30, there were reports that the government has decided to reduce defense spending.

Medvedev tries to cut defense spending

Maybe this decision will be, as expected, approved by the presidential administration that has your custom, and not by the law, the right of the last word. However, if the effect of a really reasonable measures for the economy as a whole is likely to meet an old Russian saying: what Vain.

This budget will reduce the growing hole between revenue and expenditure. But, as noted at once, all the experts and newspapers, including — "Vedomosti" newspaper — will not allow to get rid of nasty cavity. In part because there is no decision on how to deal with pensions, but there are many powerful forces that seek to quickly start up your own business accumulation of future generations.

In general, in the main financial document of the country — in the budget must be realized two things. The first — that was a reasonable benefit-cost ratio. The second — to the structure of expenditure and income to stimulate the economy. According to the Russian budget did not go the first week of heavy debate. Here, finally, the government reports that he was able to remove almost all disputes (except pension). What we see as a result? Neither the first nor the second problem is not solved.

In so doing the clear and appropriate limits on spending, for example — fiscal rule that limits spending level bar permissible deficit, unless you consider its oil revenue in excess of the original design laid down in price. As a result, there are specific amounts allowable expenses for the next three years: 13.4 trillion — in 2013, 14.6 trillion — in 2014, 15.3 trillion. — In 2015. But this does not guarantee balanced budget. And not just because it is unclear how current activities will be funded pension fund. Consider that in the case of force majeure, of course, the authorities are forced to ignore all rules, including the budget, if the global crisis breaks out. That was in 2008, when the same fiscal rule abolished and only now it is reduced from next year.

Defense spending just does not seem right cut, but decided rasyatnut time infusions. Look: in less than Finance Ministry's proposal to reduce the number of troops at ten, and law enforcement — by twenty percent. Less money each year will be allocated to the state defense order. But the old order huge amounts just scared the producers themselves — they have neither the resources nor the strength nor the technology to learn a lot of money. Moreover, the relevance of this is not to place orders, and modern equipment in the factories set, operators are able to work on it to prepare, and the master toolmaker issue finally official tool to work on state factories. Still need to organize and laboratory work to establish it as coming up with something new to this new suit is not impressive generals and administrators of finance, and military officers. For example — how to strengthen the bottom of the BMP armor so that a homemade mine kept her limbs all fares, but the engine would have pulled the car even in the mountains …
In general, even with spending cuts, the task of balancing the budget is not solved. Officials say that to blame the citizens of Russia — especially the elderly. "The budget was settled with a zero balance in accordance with the budget rule, had no problem with the Pension Fund" — quoted by the newspaper "Vedomosti" government official.

The logic is clear. Ideally, all would stop spending on all but the pompous sports, construction giant bridges and skyscrapers empty islands in mountain villages. Since pensioners would be ideal so. That man started to work at age 18 and would have died instantly on the day after retirement …

But so far did not work, there is debate in the government, which are presented to the public as a serious debate on the budget for serious people.
To believe that this is really serious disputes serious people, we ought to see at least an attempt to solve the second problem — about the incentives for development. This problem is solved like this. In the family planning budget, stupid to spend more to earn the fact that every day is a "clumsy bears," and the country should abandon, without which one can live. But in a normal family settled on a credit bondage to pay children receive jobs that will give them a guarantee of earnings. And in a normal country often is it necessary to increase the budget deficit, and inflation to adjust the economy. Do not throw money on defense orders, for example, that simply no one and nothing on which to perform, and not spend their training from the masters to the scientists. Too — and in all sectors of the economy.

However, in this case there is no progress incentives. As state-subsidized losses extremely profitable "Gazprom" and subsidizes. Raises taxes on its operations, but then some of the money to "Gazprom" and gives again.

Or, in the midst of budget battles, President Dmitry Medvedev signed a government decree on granting subsidies to the military-industrial complex (MIC). What a subsidy? Dmitry Medvedev says (quoted by RBC) that "these subsidies should partially offset the costs of the enterprises to pay the interest on loans of Vnesheconombank and other credit institutions in the development and production of military products."

Here's how simple and clear comments on the financial hitch economist Sergei Aleksashenko: "Though you burst, but I do not see how you can assist the manufacturer of the defense order, if it is initially forced to go cap in hand to the banks and borrow (and interest on it- ho-ho!) for production that has ordered the Ministry of Defense (instead proavansirovat production and thereby reduce the cost of purchased weapons). After that, to make up for only a portion of interest paid, well aware that all other interest it pays, reducing their own profits and reducing their capacity to the same "modernization and job creation … Truly, mere mortals is not subject to the logic of Russian bureaucracy thought" …

Today it is clear that the second problem — about the development should be a priority over the former. The first year, for example, Europeans rely on hard power save mode. This autumn it becomes clear — venture failed. Savings in the vulgar sense reduces purchasing power, raise unemployment, but not able to get the economy of Spain or Italy from the deep pit.

In Russia, in contrast to Europe, there is a huge competitive advantage. First, we have a huge domestic market. Second, most of our companies are working on the equipment worn even 20 years ago. That is where the investment is needed. All the projects budget for this — "not a word."

Of course, if, God forbid, in the center to create a special commission to solve the distribution of money for modernization, it's all over major new investments of Russian citizens in the construction of houses in Florida. Here can help deal with the financial flows of three characters who, for some reason, began in Russia is simply fantastic: business freedom, intense competition, reliable protection of property. All three of these things must be guaranteed by the state.

In general, it is anything else and do not need. But in the coming months (and years), we are doomed to watch debates in the government on the most exciting for the officials entitled to more than (on whom be) would have to save to get the beautiful balance.
By Alexander Bakalov

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