The Minister of Finance's Advisor Debunks Two 'Budget Myths'

Before each budget is adopted, there are calls to sharply reduce the expenditure part - by cutting administrative costs. Moreover, it is suggested to take and 'linearly' take funding away from everyone. But will this solve the budget deficit problem? The advisor to the Minister of Finance, economist Guntars Vitols, conducted a 'crash course' on budget expenditures on the social network X. "There are two entrenched myths regarding budget issues. Firstly, it is possible to cut budget expenditures linearly. This is a popular slogan. The second myth is that the problem can be solved by cutting the budget only for the 'bad', the others. Officials are almost always mentioned. Both myths are financial illiteracy. The public administration can always be made more efficient, anywhere and at any time. 10% or more? Public administration is nowhere, in no country, as efficient as private enterprise, where the drive for profit or survival is a natural regulator. In public administration, this is not present by definition, so efficiency can only be achieved through coercion, with reform and dictatorship. By force, coercion. But the budget deficit cannot be solved this way. This may help save around tens of millions, but a deficit of 2000 million remains. Large sums go into the public sector (300+ workers - police officers, doctors, teachers, soldiers). And this together amounts to billions. Then the social sphere is financed from 6 billion, the majority of society. Its amounts are individually small, but there are many recipients - that’s where those billions arise. If we really want to address the problem at its root, we need to improve efficiency across all areas as a whole, looking at where it is truly necessary, where there is inefficiency. But this will definitely affect some of us personally, even by a few euros. And this will never be popular, it is the most important issue, the root of the political problem. Practically no country in the world can solve this problem. The math of a cup of coffee. Let’s take, for example, a caffe latte for 5 euros. If every person in Latvia received a state-paid service worth less than one cup of latte per month on average, how much would be saved? 100 million a year. Not everyone drinks such an expensive latte, not everyone needs to have it taken away, I’m not suggesting that, the figure is average, for illustration. And unsponsored 20 cups of latte a month (one - each working day) solves the budget deficit to zero. Do you remember the Argentine president? The chainsaw? He achieved budget balance by cutting public spending by 800 dollars per resident per year. That’s 14 caffe lattes a month... When we cut everything else, we will do the same, and these unfinished lattes will not cause anything tragic. 20 cups a month," the economist explained.