G. (2017, January 13). 6 Pros and Cons of Deficit Spending. Retrieved
January 14, 2018, from https://greengarageblog.org/6-pros-and-cons-of-deficit-spending
Increased government spending to fight
recession can also result in a bad economy.
A country will most likely not have any savings during a deficit period, this
is because they need to prioritize paying off the debt and interest. If there
is an emergency, a country might not have any funds and may have to borrow from
other nations or banking institutions. Critics also argue
that it will reduce the amount of investments a country would normally have. If
a government cannot manage their loan correctly it could result in a recession.
An outcome of this would be that the governments debt would greatly increase,
which would lead them into a bigger recession. This would lead
to having less money to spend on infrastructure and discourage investors from
doing business in their country. If a government hikes up taxes, increase
prices of commodities and reduce public services this could cause inflation and
a lower standard of living. National sovereignty
could also be at risk. National sovereignty refers to
powers which a constituent state or republic possesses independently of the national government. “Nations or financing institutions that lend money to a country
in recession can make certain demands before approving a loan. For example, the
government in debt may have to change its spending policies and laws. It may
also have to sell off its land and other assets in order to pay off the debt. Some
economists say that deficit spending can work if the money is spent on the
right kinds of projects that will spur economic growth. But if left unchecked,
a government’s debt may become a threat to the economy of a country.”(G.).
that increased government spending to fight recessions have a lot of negative outcomes.
Advocates argue that increased government spending to fight
recessions argue that because tax cuts may be saved rather than spent, direct
government spending does more to increase aggregate demand, which is key to
promoting production and employment. Critics of spending hikes argue that tax
cuts can expand both aggregate demand and aggregate supply and that hasty
increases in government spending may lead to wasteful public projects. The
government and the people should work together to and both be allowed the
chance to put the rules and conditions to have a prospering economy. For
example, the government and the people should put the rules for tax incentives
for saving. People should be allowed the chance to form the plan of their saving
and be sure of its outcome in the future.