Preview

What Are The Pros And Cons Of Deficit Spending

Good Essays
Open Document
Open Document
511 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
What Are The Pros And Cons Of Deficit Spending
Pros and Cons of Deficit Spending

Whether used in government, economics, or finance, the underlying principle of deficit spending is the same—less income, more spending. Economists have been debating on this topic for a long time already, with those against it saying this will hinder economic growth, while those for it argue otherwise.

For this article, we will discuss the advantages and disadvantages of deficit spending in the context of government, where a governing body of a nation that is in recession needs to borrow heavily from other nations or financing entities in order to spend on infrastructure.

List of Pros of Deficit Spending

1. It pushes growth in the economy.

Since a government will have the funds, they can spend on
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    Macro Policies 30 Marker
    • 742 Words
    • 2 Pages

    Macro Policies 30 Marker

    Discuss the most effective policy approach during a time of recession, and where a country has a fiscal deficit (30 marks)…

    • 742 Words
    • 2 Pages
    Good Essays
    Read More
  • Good Essays

    ECO 372
    • 1212 Words
    • 4 Pages

    ECO 372

    In principle, deficits can provide a helpful task as long as there is the ability to level the path of distortionary taxes over a period of time, in most cases over an industry cycle. Long term deficit can be valid if they finance continuing expenditures, for example an individual who finances the acquisition of a new residence or in other cases anticipated paying off with a high national income in the futures, such as investments. In a rising financial system even with permanent rising deficit, (as long as it not increasing rapidly) it is sustainable in the long run. It has been argued time and time again that the government deficits in particular the long term deficits, enforce a direct economic cost. For taxes payers this can be a good situation. The deficits can create lower interest rates allowing individuals to purchase homes, car, boats etc at an extremely low interest rate. This is a positive impact for U.S consumers.…

    • 1212 Words
    • 4 Pages
    Good Essays
    Read More
  • Powerful Essays

    The Value Added Tax and Targeted Budget Cuts as a Means to Reduce the Federal Deficit
    • 2151 Words
    • 9 Pages

    The Value Added Tax and Targeted Budget Cuts as a Means to Reduce the Federal Deficit

    Deficit spending is a government action in which the amount of its expenditures exceeds that of its revenues. In other words, the government spends more money than it receives from its citizens through taxation. While such spending is generally considered necessary in turbulent economic times, recent annual trillion dollar deficits are alarming to say the least. To be sure, continued deficit spending threatens the very fiscal solvency of this country. Though it is reasonable to assume that both Democrats and Republicans agree as to its danger, there has been little agreement between them on how to implement a plan to reduce the deficit. Democrats by and large agree that a deficit reduction plan needs to include increased revenues, i.e. taxes. Republicans insist that the size of government should decrease, i.e. cut taxes. Despite the political volatility these two opposing ideas create, I believe that there is a way in which to do both. The question of deficit reduction then is: What is the most effective way in which to raise revenues and cut taxes?…

    • 2151 Words
    • 9 Pages
    Powerful Essays
    Read More
  • Good Essays

    Fiscal Policy Paper Eco372
    • 1420 Words
    • 6 Pages

    Fiscal Policy Paper Eco372

    When a surplus exists, the government has extra funds to spare and infuse into the economy. This surplus will increase government programs. When the government has a surplus it focuses on its needs by order of necessity, similar to the way individuals do when they have extra money. This can lead to new tax credits for taxpayers. However, when the nation is in debt the taxpayers are also in debt. The government uses tax money to finance their operations. If debt increases taxes go up, if debt decreases taxes lower for most.…

    • 1420 Words
    • 6 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    problem set 2
    • 250 Words
    • 1 Page

    problem set 2

    3. What is a budget deficit? A situation in which total government spending exceeds total government revenue during a specific time period, usually one year. How are budget deficits financed? Selling of bonds, borrowing from abroad, raising taxes, and selling of assets. Why do Keynesians believe that budget deficits will increase aggregate demand? Because they believe that both fiscal and monetary policies affect aggregate demand.…

    • 250 Words
    • 1 Page
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Questions on Tax and the U.S. Law
    • 2269 Words
    • 9 Pages

    Questions on Tax and the U.S. Law

    3. Total governmental purchases—Federal, state, and local combined—account for about what percentage of domestic output?…

    • 2269 Words
    • 9 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    The Pros And Cons Of Fiscal Policy
    • 1588 Words
    • 7 Pages

    The Pros And Cons Of Fiscal Policy

    It can create budget deficit: A budget deficit is when the government spends more money than they annually take in. (Hayes, n.d.).…

    • 1588 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Good Essays

    In What Ways Are the Government Deficits Harmful to the Economy?
    • 1328 Words
    • 6 Pages

    In What Ways Are the Government Deficits Harmful to the Economy?

    The main worry about deficits is crowding out. Crowding in was just described ?€" it occurs when deficits cause output to go up and business confidence is increased. Crowding out comes about when deficit spending raises interest rates. There is a limited amount of funds available for investment, and when government competes with the private sector for a share of these funds to finance its deficit spending, it drives the cost of these funds ?€" interest rates ?€" higher. The increase in the interest rates causes investment to fall, and lower investment translates into lower output and lower economic growth. In addition, to the extent that the private sector is more efficient than the public sector, crowding out, i.e. more government spending and less private investment, can result in a less efficient use of resources (though in the case of public goods government can be the more efficient provider, and hence it is not always the case that efficiency falls).…

    • 1328 Words
    • 6 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Eco 372 Week 4 Reflection
    • 396 Words
    • 2 Pages

    Eco 372 Week 4 Reflection

    To analyze the influence of the deficit, surplus, and debt on the health of the United States macroeconomy you have to understand what exactly is deficit and surplus. A deficit is a shortfall of revenues are under payments, and a surplus is the excess of revenues are over payments. The influence of surplus and deficit on the economy differs in the short-term framework and the long-term framework. In a short-term framework the view of deficits and surplus certainly depends on the current state of the U.S. economy relative to the economy potential output. In a long-term framework surpluses are good they provide additional savings for the economy. In a long-term framework deficits are view as bad because they reduce growth, income, and savings, but if the U.S. economy is operating below the potential its deficits is view as good for the economy. This is because deficits increase expenditures increasing the economy output closer to its potential.…

    • 396 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Federal Budget Pros And Cons
    • 391 Words
    • 2 Pages

    Federal Budget Pros And Cons

    The Federal Budget is used for many different necessities in America. It`s used for medicare, social security and more. One portion of our federal budget goes towards our military. Americans should spend less tax money on foreign armies, and more towards defense against terrorism.…

    • 391 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Bush Tax Cuts
    • 1119 Words
    • 4 Pages

    Bush Tax Cuts

    a deficit in order to stimulate spending is good thing; leaving the deficit to be…

    • 1119 Words
    • 4 Pages
    Good Essays
    Read More
  • Powerful Essays

    Federal Budget Deficit Economics
    • 2350 Words
    • 10 Pages

    Federal Budget Deficit Economics

    The U.S. Federal Budget deficit is the fiscal year difference between what the United States Government takes in from taxes and other revenues, called receipts, and the amount of money the government spends, called outlays. The items included in the deficit are considered either on budget or off budget. Generally, on-budget outlays tend to exceed on-budget receipts, while off-budget receipts tend to exceed off-budget outlays.…

    • 2350 Words
    • 10 Pages
    Powerful Essays
    Read More
  • Good Essays

    The Pros And Cons Of National Debt
    • 638 Words
    • 3 Pages

    The Pros And Cons Of National Debt

    “Debt is the fatal disease of republics, the first thing and the mightiest to undermine governments and corrupt the people” Wendell Phillips, civil rights activist and lawyer (Phillips).…

    • 638 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    People Should Worry About Federal Budget Deficit
    • 126 Words
    • 1 Page

    People Should Worry About Federal Budget Deficit

    People should worry about federal budget deficits because it will affect the way they purchase goods and services. As the government enters deeper in debt, meaning spending more than received, the citizens will end up paying the most. Due to the fact that the government is spending money on other facilities such as the roads, education, and transportation, the citizens would have to pay for these services with tax dollars. As the population increases, the demand of government services will increase as well, therefore, the higher the tax dollars paid. As time passes by, people should consider how they spend their money, especially businesses. By eliminating unnecessary programs and grants, money can be obtained from these projects. If…

    • 126 Words
    • 1 Page
    Satisfactory Essays
    Read More
  • Good Essays

    What Did The Us Get In So Much Debt Essay
    • 617 Words
    • 3 Pages

    What Did The Us Get In So Much Debt Essay

    Well first of all, deficit spending is an issue that the US has. Deficit spending is when the government spends more money than they earn. If the government isn’t making enough money, they shouldn’t be spending it on stuff the country might not even need. In the article “U.S. National Debt Hits $17 Trillion: How Did We Get Here?” it says, “A government that relies upon deficit spending to grow its economy is like a man who pays for his groceries and his rent with a credit card.” The article is talking about the US. They are saying that the US relies on deficit spending like a man pays for everything with a credit card. Meaning that they are both in debt always. With the US relying on deficit spending every time we need something that cost a lot, that puts the country is so much debt. If you think about it, the government can’t just use…

    • 617 Words
    • 3 Pages
    Good Essays
    Read More

Related Topics