Economic Issues and Public Policy

Dear friends, evaluating economic problems from the perspective of economics carries the risk of being a repetition of what experts say. Of course, when the subject is economics, the scientific quality of what can be said in this field is important, but this should not prevent us from evaluating economic problems from a different discipline. If we are talking about social problems, it would not be an exaggeration to say that we are in the common area of ​​all disciplines. Moreover, economics is more or less related to every discipline that deals with society and people.

Responsibility of Political Power in Public Policy

There are many definitions of public policy. However, there is one of them, which is accepted as both the shortest and the most comprehensive definition. Easton defines public policy as "the authoritarian allocation of values" (1). In this definition, the "authoritarian allocator" is political power. A political power does this through public policy. The basic principle in the determining processes of public policy is the public interest (2).

While the political power determines the form, duration and method of public service delivery, it does this in a public policy process. The operation of the public policy process by considering the public interest depends on the participation of institutional structures representing various segments of the society. These segments are; bureaucracy, universities, non-governmental organizations, professional organizations, media and others. Political power, which is at the decision point in public policy, creates an alternative cost with every decision taken in this direction, that is, with every decision on public policy. For example, the alternative cost of the third bridge and connected roads to Istanbul; Opportunities to be provided to public employees, resources to be transferred to education, investments to be made in health, support to agriculture, etc. it could be. The responsibility of the political power becomes visible when the costs of these alternative costs are paid by the public. For this reason, political powers must carry out their public policy processes in a transparent, fair and scientific manner. In the meantime, infrastructure built with the "build-operate-transfer" method, etc. Claiming that investments are not burdened by the public cannot be explained simply by ignorance. In our country, the foreign currency guaranteed payment plans of investments made with this method in the recent period exceed the cost of the investment made. For example, Deniz Yavuz Yılmaz, member of the KİT Commission of the Grand National Assembly of Turkey, said, "The determinations in the reports of the Court of Accounts showed that 8 projects were 169 and 2.69 times more expensive. With this money, a total of 24 highways, bridges and tunnels would have been built instead of 8. Moreover, in these projects, the contractor's procurement from abroad. The state is also the guarantor for the loan it provides” (3).

While calculating the alternative cost in this regard, the total amount to be paid by the public should be revealed, since the life of political powers cannot and should not be that long in democracies. This is clear evidence that the public interest is not taken into account in public policy decision processes.

Economics and Public Policy

Public policy always requires the use of more or less public resources. In every activity in which public resources are used, it is obligatory to seek the condition of public interest (4).

Therefore, one dimension of public policy is economic policies. We can consider this under two headings; Monetary policy and fiscal policy. "Monetary policy refers to the decisions taken to affect the availability and cost of money in order to achieve goals such as economic growth, increase in employment and price stability. The institutions responsible for its implementation are central banks. " (5).

In other words, the institution responsible for implementing the monetary policy is the Central Bank. For this purpose, the most important instrument in the hands of the Central Bank is the policy rate. The determination of this interest is the area of ​​expertise of the Central Bank and is determined with justification in a process required by the economic conditions. Of course, monetary policy as a public policy should also be managed in accordance with public policy processes. The only difference is that it is an area where the political power recognizes the expertise of the Central Bank as a decision maker. However, the fact that the political power responsible for administering the state enters the responsibility of the Central Bank for religious reasons is not only problematic in terms of public policy, but also constitutionally. In Article 24 of the Constitution, "No one can exploit religion or religious feelings or things considered sacred by religion for the purpose of basing the social, economic, political or legal fundamental order of the State, even partially, on religious rules, or for political or personal gain or influence, and can't abuse it." According to this provision, this discourse goes beyond being a political discourse and constitutes a constitutional crime. Here, I refrain from making technical comments, especially in determining the policy rate to create negative real interest rates. Because this issue is frequently mentioned by experts in the field of economics in every environment, its drawbacks are listed and it can be seen with experiences. I try to focus more on the relationship of the subject with public interest and law in the context of public policy. From this point of view, it is very clear that determining policy interest for religious reasons shows that public policy is determined without considering the principle of public interest. In other words, the political power has violated the most basic principle of public policy making processes.

Fiscal policies constitute the second dimension of economic policies. "Fiscal policy is the policies implemented by the state to ensure that the economy reaches full employment by using fiscal policy tools (such as public expenditures, taxes), to minimize economic fluctuations, and to create a fair distribution of wealth and income."(6).

Therefore, fiscal policies, which are related to the revenues and expenditures of the public, are an area where political power should be more effective than monetary policy. We can compare the fiscal policy to the foundation of a building. The more solid the foundation, the more successful the instruments such as interest rates and money supply to be determined by monetary policy will be able to maintain price stability. If the fundamentals are not solid, the impact of monetary policy (no matter how scientifically driven) will be limited. On the assumption that fiscal policies are more decisive on the general state of the economy, we can open a separate topic on this subject.

Public Revenues and Public Expenditures

I will try to summarize what I wrote under this title by combining it with today's economic conditions. Public revenues can be handled in two groups as forced and voluntary. Forced public revenues consist of items such as taxes, duties, fees, goodwill and fines that the public collects under legal force from individuals and institutions as a requirement of its sovereignty in the financial field. Voluntary public revenues, on the other hand, are derived from the economic activities, borrowing, etc. of the state, which is a public legal entity. are the public revenues arising from the will of the other party. The processes that are effective in determining both income groups are public policies. Since the state provides the necessary financial infrastructure to provide public services through these revenues, the political power that governs the state has to determine its sources while determining the policies regarding the provision of services. In fact, it is possible to talk at length about each income item, but focusing only on tax revenues in a limited area will be enough for us to understand the importance of public policy in determining revenues.

Tax revenues constitute the largest revenue item of the states. However, the share of indirect taxes in tax revenues clearly shows a public policy preference. In developed countries that have achieved income justice, the share of indirect taxes in tax revenues is relatively lower. However, in our country, this rate is in the range of 60-70%. Let's explain it like this; Taxes on fuel and food are indirect taxes. Everyone pays for it, regardless of income. However, income tax is a direct tax and everyone has to pay at the rate of their earnings. If income is not taxable, income inequality will inevitably occur. Ensuring income justice is one of the most important goals of fiscal policies. After the 2011 Tohuku Earthquake, I had the opportunity to talk with two scientists from Japan after a conference. "Have you envisioned an adjustment in tax revenues to cover the cost of such a devastating earthquake?" When I asked them, they told me that until 2020, there was only a five percent increase in income tax. I immediately thought of the 1999 Earthquake. As we will all remember, the special communication tax, which was put into effect as a temporary and indirect tax item at that time, was made permanent in 2003 (7).

If there is going to be an increase in welfare in a country, the way to this is through taxation and justice in income distribution. If a people pays more taxes compared to the public service they receive, there is a public administration that does not function properly in this country. We said that political powers create alternative costs when choosing public policy. In cases where income inequality deepens, the welfare of the people becomes an alternative cost. Therefore, priorities should be determined according to scientific data and justice. For example, instead of developing an airport with low development costs, building a new and expensive airport (if everything is legal) is a policy choice. The alternative cost of overpaid money is the welfare of the people. In other words, as long as the citizens who have lost their welfare do not have a sense of citizenship, they give the political power the right to make more mistakes.

Current Status and Indicators

We live in a period in which economic indicators are deteriorating gradually. CDS, which is called the country risk premium, has reached over 800 points. CDS is not a value determined by a particular institution or organization. CDS rises as the country's risk of bankruptcy increases in international markets. Its rise increases the interest burden on public borrowing. The increasing interest burden is reflected in the budget figures of the next year and inevitably results in an increase in taxes. While the deterioration in income distribution continues, expecting an improvement in taxes and purchasing power is scientifically unreasonable. When the budget law is enacted, it is clear how much tax revenue is foreseen for the budget of that year and how much of the tax revenue is expected to be met from indirect taxes. It is also clear how much money is set aside for interest payments. However, this issue is either not on the public agenda or does not receive the attention it deserves. When citizens start to have difficulty in paying, they are not aware that they are paying the price for the policy choices that have been decided long ago. The tax combination in the budget is also an indicator of a class policy preference. So nothing suddenly breaks down. All of them have a basis in public policy. Those who are incapable of seeing this adopt the discourses that the political power put forward as a reflection of the behavior of avoiding responsibility as "more royalist than king". If a government has not made the country's economy unaffected by foreign powers in 20 years, the political responsibility of this government is too obvious to be debated.

Actually, although I want to write more about the economic situation, I have come to the end of another article. Inevitably, the agenda of my next article will be the economy again. Of course, we will touch on public policy, but this time we will focus more on policy outcomes.

Footnotes:

(1) https://en.wikipedia.org/wiki/David_Easton , E.T. 16.06.2022

(2) https://www.blogger.com/blog/post/edit/6437777967896832870/4849115083371842449

(3) https://t24.com.tr/haber/yap-islet-devret-modeliyle-yapilan-8-projede-37-5-milyar-dolar-zarar,

(4) Anayasa Mahkemesi Kararlarında bu konu vurgulanmaktadır.

(5) https://www.tcmb.gov.tr/wps/wcm/connect/tr/tcmb+tr/main+menu/temel+faaliyetler/para+pol

(6) https://tr.wikipedia.org/wiki/Maliye_politikas%C4%B1#:~:text=Maliye%20politikas

(7)https://www.haberturk.com/tartisilan-deprem-vergisi-gercekte-nedir-haberler-2525981-ekonomi