Fiscal policy is part of a government's economic policy.
Fiscal policy is a division framed in economic policy that is responsible for establishing the budget of a State , with taxes and the variable of public spending as points to consider to preserve financial stability.
It should be noted that the activity focused on making group decisions to achieve various objectives is known as policy . It is about making use of the power that has been achieved to resolve conflicts of interest that exist in a population or society .
The term politics has its etymological origin in Greek and more specifically in the word polis , which can be translated as “city” . But not only does that emanate from this one but also from what was known at that time as “The Politeia” , which was the name that the Greeks used to refer to the so-called “Theory of the Polis” .
Fiscal , meanwhile, comes from the Latin fiscālis and refers to that which belongs to or is related to the treasury (as the set of public organizations intended for the collection of taxes or the public treasury in general is called).
Purpose of fiscal policy
The purpose of fiscal policy is to enable the growth of the economy, cushion the ups and downs of economic periods and guarantee the proper administration of State resources. Fiscal policy measures have a short-term impact on the level of employment, production and market prices.
Due to all these hallmarks that fiscal policy has, over the years it has become the focus of many groups and thinkers who have not hesitated for a single moment to question it . And the circumstances to which it has sometimes led have made not everyone trust it.
In this way, among the main arguments that have been put forward against it is that it can cause a drop in investment demand, it can bring about a trade deficit and it is also based on the fact that the propensity to consume is not always the itself, but is absolutely inconstant.
The budget of a State is defined through fiscal policy.
The importance of ideology
Like any political activity, fiscal policy is determined by the ideology of its designer and executor. The government can implement an expansionary fiscal policy (with an increase in public spending or cutting taxes) or a contractionary fiscal policy (which seeks to cut public spending and/or increase taxes).
Ultimately, fiscal policy should serve to distribute a country's wealth and correct market failures. For ethical reasons, it is considered that fiscal policy should favor those who have the least to achieve social inclusion and avoid outbreaks.
The Fiscal and Financial Policy Council in Spain
Finally, we must highlight the fact that in Spain there is what is known as the Fiscal and Financial Policy Council .
This organization, which was created in 1980 and is part of the Ministry of Finance and Public Function , has the objective of coordinating the financial activity of the State in general, developed in the different autonomous communities that make up the country.