Deficit spending in America is a popular topic among the public. People in America have mixed views on this subject and its effects on the economy. In order for the people to fully understand the impact that deficit spending can have on the economy, it is important for them to understand what deficit spending is and how it works. Deficit spending is “when a government's expenditures exceed its revenues, causing or deepening a deficit. This excess spending needs to be financed through borrowing, likely from foreign governments. The increased government spending can help stimulate the economy as more money flows in, but the jump in borrowing can have an adverse effect by raising interest rates.” (Deficit Spending, n.d.) As with most things, there are some advantages and disadvantages to deficit spending by the government. According to John Maynard Keynes, deficit spending can be a great tool to help stimulate an economy during a recession. Many economists today still follow this belief. Deficit spending can be advantageous to an economy so long …show more content…
When the government spends more money than it has, it causes the price of everything it purchases to rise. “Buying assets such as inventory for cash can allow a business to take advantage of cash discounts, for example, while using debt adds interest charges and fees on top of listed prices. Transferring one debt to another to maintain deficit spending can have a compounding effect, where interest accumulates on previous interest charges.” (Ingram, n.d) The American government has proceeded to spend more and more and increase the deficit and interest rates every year. This increase in spending and failure to repay debts owed causes tax hikes and a decline in the overall welfare of the economy and the people who live in it. It increases the unemployment rate and the poverty level, which in turn can decrease overall economic