Dotations and reduction of the budget deficit in the USSR
Dotations to the population on consumer goods became an integral line of late Soviet economy.
If the cancellation of subsidies is impossible from a political point of view, it is possible to propose to conduct the first price increase after the next harvest (in the hope of the abundance of products) and thereby reduce the subsidies at least half. It may turn out that the increase in prices, which reduces subsidies by 50%, will cause no less objections than complete abolition of subsidies. In this case, the subsidies should be completely abolished. In order to facilitate the transition to new prices, the government could import a significant amount of consumer goods. The reduction of subsidies should affect as much products as possible so that the impact of increasing prices is more fair. Although the first approximation of subsidies for all products should be reduced in the same proportion (say, by 50%), from an economic point of view, it makes sense to reduce subsidies for products, the demand for which is higher than the average redundant demand (judging by the length of the queues and other indicators) more than 50%, and on goods, the demand for which is lower, less than 50%. This is explained by the fact that in cases where the demand is relatively inelastic, income will increase, and when the demand is relatively elastic, the queues will significantly reduce.
As ratios reduction and price increase reduction, especially for the essential items, the government should in the name of justice and to avoid deprivation to compensate the most in need. On the other hand, it is necessary to avoid a general increase in salary and other types of compensation comparable to price increases, as they will reduce the beneficial effect of this increase and lead, in essence, to the further turn of price increases, and then salaries, in other words, gradually accelerating inflation. To stop inflation, it follows, if possible, to temporarily freeze or significantly limit the salary of all workers in government industries.
For more revenues, it is possible to increase prices for public sector services, transportation services both passenger and freight. Low freight rates will prevent the rational placement of enterprises and industries as markets are decentralized. The apartment fee and land rental fees are also very low and must be increased. This increase matters not only to increase current budget revenues, but mainly to stimulate the purchase of apartments and land plots, thereby significantly reducing the amount of money in circulation.
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