G. (2017, January 13). 6 Pros and Cons of Deficit Spending. RetrievedJanuary 14, 2018, from https://greengarageblog.org/6-pros-and-cons-of-deficit-spending Increased government spending to fightrecession can also result in a bad economy.
A country will most likely not have any savings during a deficit period, thisis because they need to prioritize paying off the debt and interest. If thereis an emergency, a country might not have any funds and may have to borrow fromother nations or banking institutions. Critics also arguethat it will reduce the amount of investments a country would normally have. Ifa 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 leadto having less money to spend on infrastructure and discourage investors fromdoing business in their country. If a government hikes up taxes, increaseprices of commodities and reduce public services this could cause inflation anda lower standard of living.
National sovereigntycould also be at risk. National sovereignty refers topowers which a constituent state or republic possesses independently of the national government. “Nations or financing institutions that lend money to a countryin recession can make certain demands before approving a loan. For example, thegovernment in debt may have to change its spending policies and laws. It mayalso have to sell off its land and other assets in order to pay off the debt. Someeconomists say that deficit spending can work if the money is spent on theright 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.).Critics arguethat increased government spending to fight recessions have a lot of negative outcomes.Advocates argue that increased government spending to fightrecessions argue that because tax cuts may be saved rather than spent, directgovernment spending does more to increase aggregate demand, which is key topromoting production and employment. Critics of spending hikes argue that taxcuts can expand both aggregate demand and aggregate supply and that hastyincreases in government spending may lead to wasteful public projects. Thegovernment and the people should work together to and both be allowed thechance to put the rules and conditions to have a prospering economy. Forexample, the government and the people should put the rules for tax incentivesfor saving.
People should be allowed the chance to form the plan of their savingand be sure of its outcome in the future.