1. The basic problem of public finances is the same as that inherent in the finances of non-commercial associations.
Even if economists, auditors, senior civil servants and politicians were all convinced that the basic problem of public finances and that of the finances of private associations are different, the opposite would continue to be true. Here's why.
2. Households are private associations.
Let us see, then, what is valid as well in the household bursar's office as in the bursar's office of any other kind of association, provided that it is not a enterprise. It does not matter whether or not it is a foundation and whether its purpose – provided that it is not commercial – is artistic, charitable, religious, educational, electoral, environmental, recreational, scholarly, sporting, trade union.
3. For any entity, an expense is an investment when it increases fixed assets on its balance sheet, otherwise it is an expense to be included in its income statement.
Strictly speaking, a stock of consumable supplies is an economic asset. Calling only longer-term investments "fixed assets" makes it easier to keep double-entry bookkeeping. This does not detract from the fact that economic investments are stocks, called assets, and that they are uses of the financing that constitutes the stock called liabilities. A charge, on the other hand, does not increase any stock of assets.
4. The depreciation that is part of the expenses of a household as well as of any other non-commercial entity is not the same as that which is part of the expenses of enterprises.
In the expenses of enterprises there are periodic allocations for investment depreciation, often called industrial depreciation. The expenses of enterprises also include financial expenses, which include the interest due over the period in question. In the expenses of households and all other non-commercial associations that are in debt, there is in fact another kind of depreciation. The loan instalments that are due over the period in question constitute provisions for debt amortisation, interest Interest and principal repaymentPrincipalDunCredit.
5. In the expenses of a non-commercial association in debt, not including debt amortisation is wrongful.
Here is a couple who are asking a bank for a loan. The bank takes stock of the couple's financial situation. It asks the government what its income and expenses are, and the maturities of current loans are included in the expenses. This is as normal as it is necessary.
6. In public finances, the most important budgetary result is given the allocation of the period to debt amortisation.
Not including in the expenses the allocation of the period to the amortisation of the debt makes it easier to camouflage an eviction effect. The chronic deficit of the largest budgetary result captures funds that could have contributed to retraining and job creation through their placement in permanent financing of enterprises (see above, starting with proposal 7.1.
7. Hence the rule: to hold the largest budgetary result with a chronic surplus.
The objection to this austerity is that job creation and the rise in labor incomes will be held back. However, the opposite will happen, all the more quickly and substantially as economic policy is focused on the full exercise of EPCE feedback and a different rule of public financial management is applied.
8. The other rule is: to make the weight of public investment oscillate according to the economic situation.
The explanation of this rule, followed by the more detailed explanation of the chronic surplus rule mentioned above, can be found in the second part of this report. A country that moves further and further away from respecting these two rules can, over time, only sink deeper into underemployment and corruption. Theory keeps him waiting and experience confirms it. Not recognizing this is undoubtedly a political mistake of the first magnitude.