Say, in a first step, there is a rather striking cointegration between economic growth and public spending. The first is the mechanism by which the market produces more and given the fundamental macroeconomic identity "product is equal to income" therefore is the mechanism to enlarge the national income, the second is the tool for the portion of that income for the state to be executed for the efficient provision of these goods for collective use-obsession of every economist, that no private operator is interested in producing. The first is so technical that the State allocates an institution with ministerial rank for measurement but ignores aspects human public expenditure, by definition, includes strategies to ensure social welfare.
What determines growth?, Some empirical studies argue that the loss of dynamism of the Colombian economy, for example, is explained by the loss of multifactor productivity, usually found throughout the world famous Solow residual. What supports that thesis is that growth is sustained by what is behind the accumulation of factors and not the accumulation of these. That is, the main determinant of growth is technical change, the quality of economic policy and the effects of externalities. But, on the other hand, what determines public spending?, Indeed, what should be the level of public spending could be called efficient?
An intuitive answer is that proposed in a paper by Sala-i-Martin, about ten years, who proposes five principles to explain economic growth and tacitly give a guideline for the level of expenditure over relevant: (1) the political and economic stability, (2) the degree of openness of the economy to the outside. (3) the maintenance of law and rights property, (4) the lack of government intervention, (5) investment in human capital, education and health, and (6) investment in physical capital and machinery. If we are careful to draw attention to the unwritten rule of public spending should be focused on education and health.
is where the discussion focuses on Colombia, with regard to the submission to Congress of a bill that would impose the famous fiscal rule that, when comparing the government like a business suggests the following: your expenses should not exceed their income to avoid debt excessive. Suppose the company product we call "government sector" are services that make effective the political, social, economic and fundamental rights of citizens (schools, universities, hospitals, parks, streets, security and defense, justice, etc. ), a company produces according to a production possibility frontier, according to their capacity, fixed and circulating capital, human capital and access to credit available. If the company can, maximizing and optimizing the use of its inputs, producing 10000 units, how can you expect to respond with an order of 100000?; The same with the Government: it has a provision possibilities frontier public goods and therefore must optimize their resources to maximize production of these. If the employer is irresponsible when he promises to comply with an order of 100000 and knows that its maximum is 10000, could it be that a government that guarantees more of what he can not be any mention of irresponsibility?
So the discussion is not that they want to cut spending and benefits, as opponents argue the bill, but put the Colombian government to ensure what is possible and find a mechanism to responsibly comply with those aspects to which tax is barred.
striking, on the other hand, the following: the country's growth rates have historically been higher when discrete and are due to cyclical factors, not an inherent dynamics and economic performance Colombia. If in 2007 the GDP grew by over 7% in 2009 grew only one-third of the reported three years ago. However the deficit has been growing, the casual observer perception is that money is not. It is then that spend a lot but is spent inefficiently. Certainly have to look healthy public finances, but we must seek, above all, public finance efficient.
We must therefore applaud the efforts of the Government in seeking the approval of a draft law that raises constitutional status that fiscal discipline, but also the successive reforms to transfers to regions and concepts mining royalties, the reform of the health system and all the economic reforms demanded by the country to promote higher growth and sound public expenditure. If the fiscal rule sought was an isolated event, probably the only thing it will do is de-fund an expense structure that is inflexible. However the management of other fronts, such as reforming the system public higher education and financing, health system reform and changes to the royalty regime can be transformed into something that structure. Put another way: we look fiscal discipline but also discipline in rights.
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