Russian and United States Government Spending and Taxation - Research Paper Example

Comparison between Russian and United s government spending and taxation Introduction It has been d that much emphasis has been impacted on the government as a political entity; however, economists focus on the government as the main provider of goods and services. Various goods, such as national security have been identified as unique factors suited by the government while factors such as education are provided in both private and public sectors. Globally, different countries have different measures concerning whether they should provide certain goods, in private or public sectors (Papadimitrio 21). Many industrialized countries have been developed the system of health insurances while United States lacks this system. Based on this issue it is evident that the size of public sectors varies considerably from different countries. Comparison of the economies in Russia and United States The economic relationship between Russia and the United States ended a long time, and there are no aspects of mutual destruction (CHERNIAVSKII, and VARTAPETOV 18). However, Russians have remains as the major economic powerhouses, and they have played a major role in the world stage. Russia has an improved culture history, and at times, it has been described as the military agency. However, according to Americans, it has remained an undiscovered country with numerous resources. The economic status of Russia has been in a fluctuation state compared to the United States, based on the Bolshevik revolution although it is interesting to note that differences in geographic population and the military role have a major contribution on the entire economic population (McConnell et al. 29). Economic ties between Russia and the United States are important since they provide stability to the broad bilateral relationships among the two countries. Stable political relationships have been developed by economic integration. It is evident that the current trade and investment levels of Russia and the United States are low, although there are chances to improve the country's status quo. Many structural and institutional factors have contributed to the improved US-Russia economic relations. This is based of the fact that their background has economic relationships usually perceived as exceptionally low (Papadimitriou 39). It is evident that several measures have been developed, and they are not less important that the US economic relationships with other developing markets. Government spending as a percentage of GDP Over the past couple of years, it has been noted that trade between Russia and US has developed fast, although it is rated to be on a low level. Since the year 200, the export of US to Russia have increased by an estimated of 22% annually while US imports from Russia have increased to 19% annually. On a basic analysis, it is evident that Russia has contributed to 0.7% of the US exports and 1.3% of imports in the year 2008 (Serguey and Batkibekov 47). The trade between Russia and US has been analyzed through inter-industry trade that accounts for the difference between imported and exported goods, and the intra-industry trade that accounts for similar imports and exports. Considering the different industrial structure and resource bequest of Russia and the US, it is evident that the US-Russia trade entails of inter-industry trade (CHERNIAVSKII, and VARTAPETOV 28). It has been noted that the large trade items in inter-industry trade has been accredited to 90% of the improvement of US-Russia trade (Papadimitriou 49). Considering the dominant export and import goods from US, it is evident that the most popular goods from US to Russia include nuclear equipment, vehicles and meat products. However, the largest imports to the US from Russia include mineral fuels, aluminum and inorganic chemicals. The US-Russia economic relations on international perspective gauge whether it has declined through comparison to bilateral relations. This is done, because the US has investments with other countries, such as Brazil and India (Serguey and Batkibekov 52). US-Russia Government spending as a percentage of GDP The general government financial consumption expenditure entails of all government expenditures for the purchase of goods and services. This also entails s of employee’s compensation. It also entails of expenditures on the national security, but it excludes the government military expenditures that are part of government capital formation. However, a nation GDP at the purchasing power parity, (PPP) usually and its exchange rates usually focus on the sum value of goods and services produced in Russia and they are valued at prices prevailing in the United States (CHERNIAVSKII, and VARTAPETOV 35). This is described as an effective measure since many economists prefer looking at it, to determine the per-capita welfare and also the comparison of living conditions between Russia and US. However, in consideration to US, it is difficult to compute its measure since the US dollar value has been assigned to goods and services of Russia in contrast to whether they have a direct equivalent value of in the United States. The PPP estimates for Russia are based on small diverse set of goods and services; this means that they fail to indulge in the World Bank’s PPP project that analyzes the measures (McConnell et al. 37). The secondary GDP estimates for Russia lack accuracy. This is because, the PPP-based GDP measures of developing countries, are greater than the official exchange rate (OER) measures. The deviation between OER and PPP-denominated GDP in industrialized countries such as US is usually very low. Government taxes as a percentage of GDP The tax revenue which is a percentage of the GDP in Russia, has been estimated to be 13.45 in the year 2010, according to reports by the World Bank (Papadimitriou, 52). Tax revenue focuses on compulsory transfers of central government based on public purposes. However, in this case, fines, penalties and majority social security are excluded from the tax calculations. The refunds and corrections based on erroneous tax revenue is termed as negative revenue. The tax revenue based on the percentage of the United States, was estimated to be 9.29 in the year 2010, based on the world bank report. It has been noted that in the United States, taxes based on the percentage of the GDP usually do not exceed 29% during a long period. However, the taxes have been reduced during Bush-era tax cuts and other renovations (CHERNIAVSKII, and VARTAPETOV, 38). This was made permanent through the legalization approved the congress to address the fiscal challenges. The annual percentage growth rate of US GDP at the market rates occurs constantly on its dollar currency. The aggregate is based on the United States and Russian government. The GDP is referred as the sum of gross value added by the producers in the economy and product taxes, and subsidies not entailed in the value of products are deducted. This is calculated without making deductions for depreciation that occurs on fabricated assets, or even the depletion and degradation of the natural factors (Serguey and Batkibekov, 53). GDP at the US purchaser’s price focuses on the total amount of gross value added by Russian producers in the economy and any product taxes, minus the subsidies deducted in the value of the products. It is calculated without making any prior deductions for depreciation of fabricated assets in the United States. Data in the country is in the current US dollars; however, it is evident that the dollar figures for GDP are converted from household currencies using particular official exchange currency rates. Tax rates individuals face in the countries and the different items that are taxed Various items are taxed in the US-Russian trade association. However, they use a common strategy to select the goods and products, and the distributors, depending on the product in detail (McConnell et al. 42). The US companies, usually consider various national, regional and local distributions substitutes. Some of the products include cosmetics, consumer electronics, household appliances and alcoholic beverages. The structural factors usually constrain the economic relationship between the US and Russia and it is difficult to resolve them. These include the geographical location, variance in languages and the history of the cold war. Despite the structural obstructions, there are various tangible ways that improve trade flows. The oil trades have low shares from Russia in all the US oil imports. This is different considering that Russia is one of the largest oil producers globally (Papadimitriou, 60). However, there are past aspects that limit the US oil imports to Russia, considering that the US oil plants are not suited for the process of particular types of oil produced by Russia. There are no strong Russia meeting regions in the US, and this means that the cultural and business interactions are limited. The US-Russia Business Council has recommended the development of new bilateral commissions. There is an initiative of turning the major US exports to Russia, on the nuclear cooperation between the US and Russia, and this will improve further US nuclear equipment exports. Considering the intra-industry trades, it is evident that there are low-exchanges of similar goods between the US and Russia. This is because few Russian goods apart from the energy sector have the ability to compete with the US products. The Russian government is aware of minimal competitiveness in other sectors apart from the energy sectors. This government has embarked on measures that raise awareness in the anti-crisis programs. The intra-trade could improve when Russia has modernized in the industrial structures. The international competitiveness of Russian economy has been altered by the limitation of its business climates and institutional situation (McConnell et al. 48). The US does not grant Russia the benefits of permanent normal trade relations. Russia focuses on non-discriminative aspects of treatment in comparison to other trading partners. This is because Russia is subjected to restrictions of Jackson-Vanik amendment of the trade act of 1974. Conclusion In conclusion, we note that the level of bilateral economic exchange between Russia and US is very minimal. Each of the country is accounted for the minor fractions of trade in the entire world. Trade among the two countries has been dominated by inter-industry trade with the US exporting rigorous products to Russia. However, this condition is not new, considering that the country has diverse economic organization and dynamic endowment. The US-Russia economic relations are minimal, and there are no general trends distinguishing US-Russian trade and investments from US relation with other developing market countries. This means that the economic and political association of Russia and the US requires a strong motivation through their administrations. Work Cited A, CHERNIAVSKII, and VARTAPETOV K. "Fiscal Decentralization and Local Government in the Reform Period." Problems of Economic Transition. 47.11 (2005): 18-36. Print. Fiscal Cliff: How to Protect the Middle Class, Sustain Long-Term Economic Growth, and Reduce the Federal Deficit : Hearing Before the Joint Economic Committee, Congress of the United States, One Hundred Twelfth Congress, Second Session, December 6, 2012. , 2013. Internet resource. McConnell, Campbell R, and Stanley L. Brue. Macroeconomics: Principles, Problems, and Policies. Boston: McGraw-Hill/Irwin, 2005. Print. Papadimitriou, Dimitri B. The Distributional Effects of Government Spending and Taxation. Basingstoke [England: Palgrave Macmillan, 2006. Print. Serguey, Sinelnikov, and Batkibekov Said. "Fiscal Policy and International Cooperation in the Russian Federation." Problems of Economic Transition. 49.2 (2006): 34-70. Print. Read More