Russian Federation Country Study. A Public Finance Perspective

БОЛЬШАЯ ЛЕНИНГРАДСКАЯ БИБЛИОТЕКА - РЕФЕРАТЫ - Russian Federation Country Study. A Public Finance Perspective

Russian Federation Country Study. A Public Finance Perspective

RUSSIAN FEDERATION COUNTRY STUDY

A PUBLIC FINANCE PERSPECTIVE

Ryan Grace rgrace@indiana.edu

Dmitri Maslitchenko dmitri@mailroom.com

David Lamp dlamp@indinana.edu

Political Background

The separation of powers which existed under the Soviet constitution was

essentially a myth. A Russian accurately characterized the relationships

that existed between party, state and society as, ...The state absorbed the

society, the Party absorbed the state, and the Party appartchiks, the

nomenclature under the totalitarian leadership of the Secretary-General

absorbed the Party." Both legislative and judicial branches served as

rubber stamps" to the Presidium of the Supreme Soviet which unlike the

Supreme Soviet itself was constantly in session. The development of

political reform in the late 1980s weakened the party's control over the

reigns of power. The devolution of power from the Presidium occurred

through the creation of the office of the President which received the

executive powers while the legislative powers were assigned to Congress of

Peoples Deputies. The judicial branch also achieved higher visibility

during the late Soviet period through the creation of the Committee on

Constitutional Supervision. The Soviet Union's collapse in 1992 introduced

radical changes into all aspects of Russian society. Russia has little

experience with democracy in any form. Without a strong democratic

tradition, it should not be unexpected that instability would develop in

all aspects of Russian life. The role of governmental finance in post-

Soviet society is no exception. Competing explanations exist for Russia's

travails but a shared trait of many them is the distribution of power at

the federal level and the relationship between the federal and sub-national

levels of government.

Political problems did not take long to develop in the Russian Federation

after the USSR's dissolution. At the federal level, the creation of the

present constitution is one cause of the instability which plagues Russia

today. After winning a national referendum on August 15, 1993 in which the

electorate was asked to endorse the Yeltsin's reform policy, he convened a

constitutional assembly to ratify his version of the new constitution.

Three drafts were in contention to replace the constitution under which the

Soviet Union was nominally ruled. Other than Yeltsin's constitution which

became the one implemented, the two other variants were the communist draft

which advocated a strong Presidium of the Supreme Soviet with a chairman

who had similar powers to the position of General Secretary during the

Soviet period and the Rumyanstev draft which contained plans to restrict

executive power and grant the legislative body wide powers. Yeltsin's draft

advocated the exact opposite of the aforementioned plans with wide powers

to the executive and minimal power delegated to the legislative. After the

Duma rejected Yeltsin's order to dissolve, he ordered military troops to

forcefully evacuate the building--which they did by shelling it. Briefly,

the president is the protector of the constitution, human rights, and civil

liberty. In order to protect the constitution and the aforementioned

rights, the constitution grants the president wide injunctive and

declarative powers. The former powers consist of the president's ability to

use "conciliation procedures to resolve disputes between the federal

government and the governments of the constituent subjects and disputes

between the various subjects of the federation." A three stage procedure

exists for the adjudication of disputes but his ability to suspend

legislation after it is submitted to the appropriate court" which he deems

to be in violation of the constitution is considered by many as

inappropriate for a fledgling democracy. The President also has the power

to issue decrees and orders which are superior to the laws of the

government as long as the decree or order does not violate the

constitution. Further, the president has the ability to appoint important

member of his government without consent for the Duma and has sole power to

appoint and remove the command structure of the Armed Forces. In regards to

the legislature, the president has the ability to dissolve the Duma if it

passes two no-confidence vote in the Russian government within three months

of each other and if it rejects three presidential nominee for Chairman of

the Russian government. Although there are limitations of the president's

ability to dissolve the Duma, it remains a potential weapon against a

contentious parliament that affects every aspect of public finance.

The power of the legislative and judicial branch are limited in relation to

the executive. Russia's judicial system consists of a several court systems

that have different spheres of federal/national jurisdiction." The most

visible court is the Constitutional Court which has the right to review the

constitutionally of all federal laws, presidential orders and degrees,

legislation of government, and unratified treaties. Challenges to the

aforementioned areas must be brought by individuals with standing. Although

the Constitutional Court's power seems vast, the president's expansive

powers and lack of civil relations between the different branches makes the

Court's utilization of this power suspect. Federal law and federal

constitution laws are the two types of laws which exist in the Russian

Federation. The latter is considered superior to federal laws. The

procedure for enactment differ in each case. Once a bill is passed it must

presented to the president within five days of the passage by the

parliament. The president then has fourteen days to reject the law. In

order to veto the federal law, a two-thirds majority must be gained in both

parts of the legislative assembly. In the case of federal constitutional

law, three quarters of the Federation Council and two thirds of the Duma

must approve it for enactment. The constitution does not describe any right

for the president to veto federal constitutional laws. According to Article

106 of the Russian Constitution, laws in regard to the following area must

be voted upon by the Federation Council: The federal budget, federal taxes

and levies, foreign currencies, custom regulation, and currency issuance.

Budgeting

Recently, the Duma rejected the government's first draft of the budget.

Deputies were divided over the size of the projected federal budget

deficit, which was set at 95.4 trillion rubles or 3.5 percent of GNP. When

the budget is rejected by the Duma, the government has 20 days to revise

and re-submit the budget. If differences exist between the government's

proposed budget and the Duma's, an option exists to create a committee to

reconcile their disagreements. The Duma rejected the government's proposed

1997 budget in October 1996 and did not opt initially for such a

commission. If no budget agreement is reached, parliament would be forced

to pass monthly or quarterly budgets which would cause confusion throughout

the economy. Since the initial rejection however, a reconciliation

commission (in which both houses of parliament and the government are

represented), has been working on a new version. The reconciliation

commission is due to have a final meeting on Wednesday, with the Duma

giving the budget a new first reading on November 20 or 21. There is no

legal framework to cover the failure to pass the budget, but parliament has

faced the problem every year of Russia's independence except 1996 and has

in the past approved temporary budgets.

The work of the reconciliation commission is being drawn out because

neither the communist majority in parliament nor the government wants to

take responsibility for making a decision on the budget. Russia is trying

to keep to a small deficit in 1997 under pressure from the International

Monetary Fund, but the Duma is eager to increase budget spending to a

starved economy. Reform minded deputies want a lower budget deficit to

achieve lower credit rates--which they say are vital for economic growth

but which are kept high through heavy government borrowing. The dilemma is

that the communists in the parliament want to increase spending and as a

majority they can block implementation of any