Explain Why The Federal Government Should Never Run A Deficit
The Federal Government should never run a deficit. There should be a law enacted to state this
Often during tough business cycles, the Federal Government may run a deficit which increases the overwhelming amounts of debt a country may have. Currently, the Canadian Federal government is projected to have a national debt of over a trillion dollars. Governments incur debt when their expenses exceed the amount they receive through taxes. Usually the reason behind a government deficit can be attributed to a recession. Some may argue that the economy would work through its natural cycle and that recessions would eventually move on. Although this may be true, governments cannot remain idle while their country trudges through rough times. In addition, …show more content…
The presiding president during the start of the depression was President Herbert Hoover, a man who was “obsessed with balancing the budget”, as it was the norm to do so for American federal governments prior to the stock market crash of 1929. However, after the crash, when it was evident that attempting to create a balanced budget would not always cure the economy, federal deficits became common in American history. President Hoover knew that temporary deficits were necessary to correct the economy so he “cut taxes, increased public-works spending, and established loan programs to assist state and local public works and state unemployment relief”. In doing so he transformed the $734 million surplus he inherited into a $2.7 billion deficit. However, despite Hoover’s attempts, the measures he took proved to be utterly insufficient since he restricted the amount of spending the government could do. When Franklin D. Roosevelt overtook the presidency, he dramatically increased government spending and applied Keynesian economics to alleviate the situation. He expanded the deficit by creating social programs and increasing expenditures through the New Deal to help the public and eventually, after years of overspending, the economy could be pulled out of its
Often during tough business cycles, the Federal Government may run a deficit which increases the overwhelming amounts of debt a country may have. Currently, the Canadian Federal government is projected to have a national debt of over a trillion dollars. Governments incur debt when their expenses exceed the amount they receive through taxes. Usually the reason behind a government deficit can be attributed to a recession. Some may argue that the economy would work through its natural cycle and that recessions would eventually move on. Although this may be true, governments cannot remain idle while their country trudges through rough times. In addition, …show more content…
The presiding president during the start of the depression was President Herbert Hoover, a man who was “obsessed with balancing the budget”, as it was the norm to do so for American federal governments prior to the stock market crash of 1929. However, after the crash, when it was evident that attempting to create a balanced budget would not always cure the economy, federal deficits became common in American history. President Hoover knew that temporary deficits were necessary to correct the economy so he “cut taxes, increased public-works spending, and established loan programs to assist state and local public works and state unemployment relief”. In doing so he transformed the $734 million surplus he inherited into a $2.7 billion deficit. However, despite Hoover’s attempts, the measures he took proved to be utterly insufficient since he restricted the amount of spending the government could do. When Franklin D. Roosevelt overtook the presidency, he dramatically increased government spending and applied Keynesian economics to alleviate the situation. He expanded the deficit by creating social programs and increasing expenditures through the New Deal to help the public and eventually, after years of overspending, the economy could be pulled out of its