The Budget of Saudi Arabia and the USA

Words: 1146
Topic: Business & Economics
Updated:

The comparison of budgets of the two super states may be essential for further evaluation of financial potentials of both countries. The paper is claimed to evaluate and compare the budgets of Saudi Arabia and the United States of America.

In the year 2007, Saudi Arabia anticipated a budget shortage. It was grounded on a tremendously traditional price supposition of $19 per barrel for Saudi oil and a supposed production of 7.7 Mbbl/d (1,220,000 m³/d). Both of these approximates turned out to be far below real extents. Consequently, as of mid-December 2005, the Saudi Finance Ministry anticipated a huge budget surplus of $26.1 billion, on budget incomes of $104.8 billion (nearly twofold the state’s initial estimate) and expenses of $78.6 billion (28 percent over the endorsed budget extents). This excess is applied for several reasons: paying down the public liability (to $164 billion from $176 billion); extra expenditure on education and other projects; augmented safety expenses (probably an additional $2.5 billion dollars) due to hazards from terrorists; and higher imbursements to Saudi citizens through funding (for lodging, education, medicare, etc.). For 2007, Saudi Arabia is presuming an impartial budget, with incomes and expenditures of $74.6 billion each (Blanche 4).

In spite of the current surge in its oil revenue, Saudi Arabia goes on facing crucial long-term financial challenges, entailing high rates of redundancy (12 percent of Saudi publics), one of the world’s greatest population increase extents, and the resulting requirement for augmented government expenditure. The Kingdom was also facing crucial safety threats, entailing a number of terrorist attacks (on foreign workers, chiefly) in 2003 and 2004. In retort, the Saudis apparently sloped up expenditure in the safety sphere (reportedly by 50 percent in 2007, from $5.5 billion in 2006). In 2007, Saudi Arabia’s citizens got around $20,700 per person (Blanche 5).

Defense Social security Medicare Interest Other discretionary
8% 35% 24% 6% 17%

In its turn, in the USA Treasury alterations of prior year data entailed a $164 million augment in various federal fund remove taxes for 2007 and other slight corrections to 2006 and 2007. Moreover, the data was regulated to reproduce anticipated Treasury rectifications for Tennessee Valley Authority debt that will augment debt in 2006 and 2007by $300 million and $272 million correspondingly.

GAO describes “earmarking” as “designating any segment of a lump-sum quantity for particular aims by means of lawmaking language.” Earmarking can also denote “dedicating compilations by law for an exact reason.” Sometimes, lawmaking language may regulate federal agencies to spend funds on special schemes. In other cases, earmarks refer to courses in misappropriation committee accounts, which are not regarded as law. Different institutions evaluated the total figure and amount of earmarks. The estimated 16,000 assigns comprising nearly $48 billion in expenditures were interleaved into greater, often unrelated bills for the year 2006. While the amount of earmarks increased in the past decade, the total quantity of earmarked funds is relevantly small in comparison to largely federal expenditure.

The U.S. Federal Government accounted $2,568 billion revenue in 2007, while expenditure accounted $2,730 billion, creating a total shortfall of $162 billion, which was adjoined to the United States public debt. Since 1970, the U.S. Federal Government experienced deficits for all but four years (1998-2001) adjoining to a complete debt of $9.34 trillion as of April 24, 2008 (Cordesman 34).

Personal income taxes (43%) and Social Safety/Social Insurance taxes (35%) are the centrally receipt sorts. Social Security, Defense, and Medicare/Medicaid spending are the main spending categories, at roughly 20% of total expenditures each.

Defense Social security Medicare Interest Other discretionary
20% 21% 19% 9% 31%

Saudi Arabia tested with a social safety system some time ago, intended to entail foreign workers and retirees. There are no state annuity systems in Saudi Arabia for foreign emigrants, nevertheless, some state organizations and some international corporations have business pension plans. If one has been paying into a state annuity structure while working in his or her home country, it is necessary to continue to do so. These are basically one of the best speculations that can be made for the unremitting return they offer after the retirement. Nevertheless, emigrants should take improvement of their high disposable revenue in Saudi Arabia to set up an individual pension scheme. There are lots of corporations providing a variety of schemes, either grounded on lump sums or maintained by regular reductions.

To compare the data (Saudi Arabia) with the USA, it is necessary to mention, that it has larger experience in providing social insurance and making pension plans. It is stipulated by the particularities of historical background. The Pension Benefit Guaranty Corporation (PBGC) defends the departure advantages of nearly 44 million workers and retirees without the use of tax dollars from the communal fund. PBGC’s revenue is obtained from insurance payments paid by 30,460 assured defined benefit pension schemes, assets from expired trusted plans, investment revenue, and revivals from companies accountable for concluded underfunded plans. Premium revenue totaled about $1.6 billion in 2007 (Cordesman 35).

For plan years starting in 2008, all single-employer pension schemes pay a basic flat-rate premium of $33 per contributor per year. Underfunded pension schemes pay an extra variable-rate charge of $9 per $1,000 of unfunded vested revenues. The premium for the lesser multiemployer program is $9 per contributor per year (Cordesman 33).

With performing the Deficit Reduction Act of 2005, general payment rates attained current levels for plan years starting on or after January 1, 2006. Set at $1,250 per contributor per year for convinced plan extinctions starting after 2005 and before 2011, the innovative premium is allocated for three years after extinction. Special regulations are applied in some cases entailing economic failure: the three-year imbursement period starts after the renouncement of bankruptcy, and the payment is adjusted only if the bankruptcy is filed on or after October 18, 2005. This regulation does not alter variable-rate premium indicts.

At the time of selecting for the pension scheme, the policy makers describe the retirement age; at this age, a person is offered one-third of the accrued amount as a bump sum premium. This lump sum payment (focus on a maximum of one-third of the amount) is tax-free in the offers of the policy holder. The equilibrium quantity is exchanged into monthly revenue, also regarded as pension. In other words, the policy holder can select to invest the balance sum with any life insurer to gain monthly revenue for the rest of his life. The period over which they will get the monthly income is known as the annuity period; the monthly income is taxable as per the policy holder’s tax lump (Cordesman 37).

A significant feature of most pension plans attainable in the Arabian market is the lack of an insurance benefit. The taxes (i.e. premium for life cover) would be subtracted from the pension plan payment allocated by the state which will also influence the returns.

Works Cited

Blanche, Elizabeth. “Saudi oil deal: A landmark agreement.” The Middle East (March 2001): 4-20.

Cordesman, Anthony H. Saudi Arabia Enters the Twenty-First Century: The Political, Foreign Policy, Economic, and Energy Dimensions. Westport, CT: Praeger, 2003.