Government and Budget Process (Essay Sample)

Government and Budget Process
Student’s Name
Institutional Affiliation
Government and Budget Process
Market failures are consequences of failing to implement pricing systems that consider every dimension of the costs and benefits of consuming a product. Before a market falls, the supply and demand dimensions of that market become inefficient and do not reflect consumers' marginal benefits. It means there are no equilibrium prices for produced products. How the market is structured explains the causes of market failure. It is difficult to establish a perfect market due to the structural constraints that lead to a loss. Market failures include externalities, the inefficiency of production processes, and environmental issues, among other market failure causes. The government might respond to market failure by enacting legislation, taxation, and collaborating with other economies. The purpose of this report is to investigate the role and function of budgeting and usage of taxpayer resources in correcting market failures. Budgeting and the use of taxpayer resources are two approaches that are commonly used to correct market failures.
The Role of Government Budget Process
Budgeting refers to a comprehensive and synchronized process put forward by the management of an enterprise and represented in financial terms. It is a process central to the operations and resources of a firm for a definite period. Budgeting involves monitoring revenues and expenditure, deciding on an organization's financial goals, forecasting, and periodic appraisal of economic performance and attainment of set objectives (Isaacs, Lawal, & Okoli, 2015). For any organization, the significance of budgeting cannot be overemphasized. Budgeting gives an organization a sense of direction regarding financial performance and is vital in management planning and control. Budgeting can cover various aspects of business operation, including sales, production, resources acquisition, and labor. The government's role in the budget process includes the imposition of taxes in diverse sections of the economy, impacting the distribution and consumption of goods. The government then provides budgets on investments and expenditures in various sectors, and these are the things that contribute to the development or stagnation of industries. Budgeting is essential when trying to correct externalities and other market failures.
The Role of Government in Correcting Externalities and Other Market Failures
Budgeting helps correct externalities and other market failures by prioritizing various economic capabilities when considering the finances at its disposal. Where externalities and other causes of market failure are identified, budgeting becomes a critical element of effectively addressing the failures. First, budgeting functions as a management tool. As a management tool, budgeting clearly outlines the aims of expenditures and presents them in a form that can help regulate the prices of products in the market (Garrison, Noreen, & Brewer, 2011). The dimensions of budgeting require different industries to pay attention to revenue collection, expenditure, and the overall government policies. An enterprise can evaluate business operations costs and use budgeting goals to align costs and prices of products. The budgeting process helps balance different market factors, hence helping correct externalities and other market failures. The government can intervene by implementing policies, such as increasing taxes for cigarettes, reducing their consumption, and shifting the balance towards healthy goods consumption.
The Use of Taxpayer Resources to Correct Externalities and Other Market Failures
Using taxpayer resources is an excellent approach to correcting externalities and other market failures. Taxpayers are individuals obligated to pay taxes to authorities. Taxpayers' resources are, therefore, money and other assets authorities get from taxpayers. Externalities and market failure can be corrected when consumers pay taxes for the products they purchase. Paying taxes helps bring balance to the market and stabilize the prices of products. It requires punitive taxation policies, which are achieved when authorities enact effective taxation laws. The taxation policies need to be justified on the grounds of correcting the inefficient outcomes of the market. Tax adjustments will help competitors in a free market try and push products' prices towards equilibrium (Ross, 2020). The increase of taxes on demerit goods reduces their consumption, which is another way taxpayers' resources are utilized to correct market failures.
Taxpayers' resources best solve the issue of negative externalities. These are market failure factors that arise from spillover impacts of third parties. By utilizing taxpayers' resources on negative externalities, the consumers and producers alike will pay the products' full social price. Examples of negative externalities include secondhand cigarette smoke that affects the health outcomes of nonsmokers. When consumers and producers pay the total social price, they will likely reduce their products' consumption.
Consequently, it leads to a more feasible outcome. Using taxpayers’ resources has limitations, however. It is difficult to estimate the exac