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Government Spending, Deficits, And Keynesian Economics

1277 words - 5 pages

A growing government is opposite to America’s economic interests because the various methods of financing a government - taxes, borrowing, and printing money have harmful effects upon the economy. There are many reasons why there is a high deficit in the United States such as extensive spending. This is true because government spending is often economically destructive, regardless of how it is financed. There are many causes of the steady growth in U.S. trade deficits. There are many people are against the high deficits especially economists.

“Economists define government intervention in the foreign exchange market as the buying or selling of foreign exchange for the purpose of manipulating the exchange rate. “(Case, pg. 398) Economists would agree that there are situations which lower levels of government spending would improve economic growth and other situations in which higher levels of government spending would be pleasing. Economists will generally agree that government spending becomes a burden. Economists feel as though by raising the deficit we are spending money the economy does not. If United States would raise taxes to help pay off the deficit that would not work since so many Americans are out of work. In addition, they believe that raising the GDP taken by the state sector has a negative effect on the growth of the private sector of the economy. Even though the economy could benefit from the budget deficit such as economic growth, the economists do not want to take a chance on that. Also, some economists are also concerned that higher borrowing by the government may also openly result in reduced utilization spending. They argue households recognize that higher current government borrowing results in higher future taxes. Budget deficits are terrible because they supposedly lead to higher interest rates. Since higher interest rates are believed to reduce investment, and because investment is necessary for long-run economic growth, proponents of this view also known as "deficit hawks" emphasize that avoiding deficits should be the primary goal of fiscal policy.

Yes, the reason for the high budget deficit matter because many economists feels as though this will eventually affect our children and/or even our grandchildren. Not only that we must know how to budget the money. The government needs to know if they need to offer higher interest rates to attract enough buyers of government debt. Excess amount of borrowing adds to the National debt which means the Government has to spend more each year. Another reason why it matters we need to cut out and/or investigate where the wasteful spending is going and if we need to cut back on public sector spending or by raising the burden. There are few programs I think that we could cut to help in our financial situation right now such as public assistance. I am all for helping people in need especially children, senior citizens, and disabled. However, I am not willing to offer...

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