The Pros And Cons Of Deficit Spending In The United States

When a government’s spending exceeds that of the revenue for which they generate, the resulting debt, or deficit, will lead to tough expenditure cuts and decisions which will effect the country as a whole. Generally speaking, deficits occur as a result of the economic downturn of a society; as unemployment increases, the gross income of the population decreases meaning that, if a country does not employ a flat tax rate, but instead the tax rate varies based upon income of the individual as seen in the United States, the country will not collect as much revenue from the tax payers as it had previously. For this reason, during economic hardships, a government might find it desirable to borrow capital in order to fund programs that may in fact

At these times, the aggregate income within the country will fall, leading to greater unemployment while hirer costs of government spending on assistance will occur (Chrystal 49). If the government were to raise taxes in order to compensate for the higher cost of government subsidy programs, it would further diminish the economy as individuals struggled to meet the rising cost of federal taxation (Chrystal 51). If instead, however, the government were to borrow revenue from the an outside source, they would be able to generate a greater output within the economy which would in effect boost the employment rate and national spending and ease the recession, making deficit spending beneficial to the

The money spend by the government is generally borrowed which increases the public debt without deflating the private sector further and allows the government to invest in the programs that would essentially help to lower the federal deficit. This, however, can lead to higher prices upon goods and services for the individual as well as raise the interest rates on loans given within the private sector. When weighing the advantages and disadvantages of deficit spending, one might conclude that although it might not be desirable to create further debt when there is no guarantee that productivity will increase and thereby, no guarantee that the economy will see an upturn; there are times that deficit spending is necessarily and when used consciously and strategically in order to boost the economy, it has the potential to help short and long term economic