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Will we live better because of the new budget?

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“The idea for this text came about when, a few days ago, at an interview related to the analysis of the budget for the coming year, I heard the question of whether we will live better because of this new budget. The question was not clear to me, just as it seems the interlocutor who asked it was not completely clear either, but it made me think a little more deeply about it.

Economists are notorious for often thinking quite differently from a large number of other people. This is surely a consequence of the fact that basic knowledge in economics is not a body of knowledge that is acquired in high school or primary school, and not even in most colleges – unlike, for example, sociology, biology or chemistry. Economics is not a special, mysterious and difficult science – if it were, most economists would not be able to master it.

What is the budget for?

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The first level of analysis of this issue concerns the lack of knowledge of basic economic terms and legality. The budget does not serve to make life better, because its goal is to finance activities organized by the state. And that depends on political decisions, which are influenced by the political preferences of voters, the strength of social groups competing for influence, cultural and political foundations.

It is enough to look at the system in other countries – somewhere there are very high social allocations like in the Scandinavian countries intended for the majority of citizens, and somewhere these allocations are lower and intended only for those with low incomes, like in the Anglo-Saxon countries. Sometimes health insurance is financed predominantly from the budget (as in Great Britain), somewhere from employee contributions (as in our country), somewhere private health insurance is mandatory (as in the Netherlands or Switzerland), sometimes, although the funding is state, it includes the services of private clinic (as in Sweden) or not (as here).

Because of the budget, whatever it is, we will not live better. Because the budget is not filled with manna from heaven, ex nihilo, but by taking taxpayers’ money. In order for the state to give to someone, it first had to take from someone. Until now, no country has reached prosperity through taxation, but through economic development.

But the budget can help growth

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Some government policies can help economic growth. A good business environment costs the same and is not the result of spontaneous decisions of state officials, but the result of the organization and functioning of the state administration. Good public infrastructure – roads, railways, metro, gas pipelines and transmission lines – reduce transport costs and provide space for private investments. Good education enables faster technology transfer and technological development, and a quality health system increases productivity. However, such policies bring with them only long-term positive consequences, and as it looks like the budget in one of these domains in the next year does not mean much.

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