Running head: PUBLIC BUDGETING 1

Public budgeting and Economic Development

Student’s Name

Professor’s Name

Institutional Affiliation

Date
PUBLIC BUDGETING 2

Public budgeting and Economic Development

A budget is identified as an economic element that is designed using the political

aspect of the country to assist resource allocation according to the aggregate demand. Thus, a

public budget is used as a political instrument that helps and guides the policy priorities to

public resource allocation to the people while it intends to manage the public sector

(Wildavsky, 2017). Public budgeting, therefore, is the process through which the ends are

selected, and the means of achieving these ends clearly stated. Seemingly, looking at the

economy from an economic view, public budgeting is the resource allocation process

according to the available opportunity cost. Therefore, budgeting requires the local

government to collect information that will be used by decision-makers in making political,

technical, and resource allocation decisions. The essay will appreciate the critical function a

public budget plays in a local government while it enhances the development and growth of

the economy. Importantly, I will focus on the factors that would promote or hinder the

development of a budget and its practical implementation.

In the current economy, the political environment of the local government does not

have the status quo anymore because the system is no longer working for them. The

economic recovery is slow and one that does not meet the aggregate demand of the country.

In this case, a local government should prioritize resource allocation to meet the economic

and social needs of the people so that it is competent in managing public finances. The state

of the economy should bring the citizens together in an engagement to facilitate innovation

and creativity that will boost the economic performance and maintain a balance between the

fiscal problems and needs of the citizens in the country. Strong leadership should initiate

meetings and public hearings so that the public gets to hear from the government directly or

indirectly through developed agencies (Ríos, Benito & Bastida, 2017). This way,
PUBLIC BUDGETING 3

transparency in the government operations will make the citizens comfortable and bring them

at a point of innovativeness.

Therefore, the government has to make reforms so that the governance of public

resources are used in complete transparency and accountability (Farazmand, 2018). At the

level of a local government, public budgeting takes several steps that link the people's

policies to the plan of finances and the actual implementation of the budget. Besides, they are

need to involve the community in the process because they can harness improvement in the

budget efficiencies, investment in the underserved regions, and appropriate service delivery

to all individuals. For this reason, financial accountability in any country requires that reports

on local government expenditures are made in every fiscal year.

Economic planning is a necessary process that attempts to bring coordination between

the financial decisions made so that the set objectives of development can be achieved in the

long run. In such a way, the public budget acts as a connecting link between human demand

and financial resources provided by the government (Wildavsky, 2017). Public budgeting

will yield the society several benefits because it can show the benefits derived by the

community from these allocations. Besides, it will be possible for the government to

articulate the economic policy to use in any given situation. Therefore, public budgeting for

a government is used as public policy necessary to inform the public how the government

plans to earn and sell that fiscal year. It provides the current state of the economy, and this

then provides solutions as to how economic challenges will be solved.

Functions of public budgeting and the relation it has to economic growth

First and foremost, it is necessary to connect the budget at hand to the policy

objectives of the local government. Politics in the local government facilitate the budgeting

process resulting in a political document. Therefore, resource allocation is made from

PUBLIC BUDGETING 4

judgment made by decision-makers on community values. There laid out programs, plans,

and policies that are set to facilitate the achievement of the long-term objectives. Besides, the

local government, through its financial officials are responsible for developing a working

budget that serves the purposes of the government. In most cases, the budget of any

government would be to ensure reallocation of resources, economic stability, reduced

inequality in income and wealth distribution in the society, economic growth, managing

public enterprises, and reduce regional disparities. Therefore, it is essential that the objectives

of the public objectives are revised when the economic recovery of the country grows at a

slow rate. With reduced assistance of the federal agencies to the people indicate that the

country's financial state requires assistance.

The economic policy or rather the political policy of any country is to make sure that

the economy grows, jobs are created for professionals and non-professionals, and stagnant

wages raised equally for all individuals. This will ensure that income and wealth are

uniformly distributed in different regions. The budgetary formed policy could impose higher

taxes on the wealthy individuals in the area while spending the amount on the poor so that

their welfare is raised. As a result, income available to the rich reduces, and living standards

for the poor citizens increased. Also, the policy makes sure that regional differences are

reduced through expenditure and taxation policies. There, the local government using public

budgeting makes sure that economically backward areas are facilitated will amenities that

encourage increased production.

The economic growth of any economy will highly depend on the savings and

investment. Using the budgetary policy in place, enough resources are mobilized for

investment in the public sector. Hence, it is the responsibility of the local government to

create a conducive environment that nurtures the habits of saving and investment. Public

investments are one way through which the local government could use to make sure that the
PUBLIC BUDGETING 5

economy grows in the future. These investments include education, infrastructure, and public

amenities, such as health (Adeoye & Islam, 2019). They are the most critical elements any

citizen would like address in the public budget so that issues of slow growth, lack of

consistent full employment and stagnant wages are resolved. However, it is crucial to

consider that most of these investments would only be effective if the community participates

in making these decisions. For instance, infrastructure combines both transportation and

communication, which only community members understand best where needs investment

urgently (Palei, 2015). The community can then set businesses that can fairly compete with

others in a similar setting.

Besides, a trickle-down approach to taxation could help everyone in society directly

or indirectly. This is because tax payment forms part of the financial system that is used in

the public budgeting process as a factor that determines how much is available and how much

should be spent by the government. Therefore, the tax policy should be considered in line

with how changes in expenditure and taxers could finally affect the aggregate demand. In the

analysis of this policy, it is possible to find that economic growth is experienced with a tax

cut. Tax cuts encourage investments by the producers in the country so that the price of

production is low to eventually enable consumption by the consumer at a small and

affordable price.

Furthermore, reduced disparities and equality in income and wealth distribution are

also enhanced by the reallocation of resources (Moiseev, Manakhov & Demenko, 2016).

Budgetary policy will be used depending on the economic state of the country and the social

sensitiveness of the country. However, the government has to influence these allocations

through tax subsidies and direct production of goods and services.

PUBLIC BUDGETING 6

In conclusion, it is possible to increase the rate of economic recovery through the use

of the public budget as a policy for economic development and growth. Most important is the

consideration of the public and involving them while planning the budget in a local

government. The impact of the budget would be useful because they get to choose what they

most feel is vital to them at that particular time. Therefore, a public budget must be formed

around the objectives of the local government for the benefit of the entire community. The

budgetary policy established by the political and economic class of decision-makers should

be based on resource allocation, financial stability, management of the public enterprises,

reduced inequalities in income and wealth, reduced regional disparities, and economic growth

in a slowly recovering economy.

PUBLIC BUDGETING 7

References

Adeoye, O. A., & Islam, S. M. (2019). Comparing Public-Private Partnership Infrastructure

Financing Approach in a Developing and Developed Economy. International Journal

of Business and Economics, 4(1).

Farazmand, A. (Ed.). (2018). Global encyclopedia of public administration, public policy,

and governance. New York, NY: Springer.

Moiseev, N. A., Manakhov, S. V., & Demenko, O. G. (2016). Boosting regional

competitiveness level via budgetary policy optimization. International Journal of

Applied Business and Economic Research, 14(10), 7315-7324.

Palei, T. (2015). Assessing the impact of infrastructure on economic growth and global

competitiveness. Procedia Economics and Finance, 23, 168-175.

Ríos, A. M., Benito, B., & Bastida, F. (2017). Factors explaining public participation in the

central government budget process. Australian Journal of Public

Administration, 76(1), 48-64.

Wildavsky, A. (2017). Budgeting and governing. Routledge.