The government should run the deficits in funding policies and programs in the country. The growth of fiscal deficit can enhance a dead economy by providing more finance to the people who are in the position to invest and purchase more investments. The use of long-term deficits can have a detrimental effect on the growth and stability of the economy from one perspective to another (Bergman et al., 2016). In the past decades, countries such as the United States have consistently run their deficits in managing the operations of the economic activities in the country. The scenario where the government spends more money than it receives from taxes can be revenue excluding the debt in a given period. The gap between income and spending is closed in the spending rate the government has engaged in, which increases the national debt level. Several economists and policy analysts have shared their opinion on government involvement in the running of the policies and deficits.
Paul Krugman, a Nobel Laureate, stated that the government did not spend enough money in the recession period of 2007 and 2009 since it was propagated by the unwillingness of the congress in running larger deficits in boosting the aggregate demands (Nasution 2017). However, other scholars state that the budget deficit has led to a budget deficit in crowding classified borrowing, which manipulates the capital system and interest rates to decrease net exports. This private borrowing on budget deficit will affect the country’s economy’s higher taxes and inflations rate.
In around the 20th century, several economists and government advisers were for the opinion that favored balanced budget surplus; during the Keynesian revolution, the rise of the demand-driven macroeconomics allowed most of the government agencies to be more involved in spending more than what they borrowed in the country (Nasution 2017). Keynes refused the idea that the government could borrow capital and increase expenses as part of the fiscal policy in stabilizing the economy. In his opinion, Keynes argued that when the economic downturn has emerged in the country, there will be more fears as it will affect the investors and local businessmen in the country (Bergman et al., 2016). A country without an effective economic policy on deficit management will face certain challenges such as unemployment and depression in the economy.
The long-term budget deficit has several impacts on the country’s economy from one perspective to another. For instance, the United States faces a considerable projected fiscal deficit in the coming decades. Some of the basis which has impacted this factor is the increase in the life span, retirement age, healthcare technology changes, and spending rate bon Medicare activities (Nasution 2017). The following factors are eating on the budget and finances of the local American citizens daily.
The second huge problem is the sunset found in the tax code. The sunset affects the revenue growth of the country, a move that has impacted the GDP level of the country tremendously. The sunsets in the tax code will allow the revenue to reduce by 2.7 percent (Bergman et al., 2016). The prospective profits losses are huge and are estimated to be three times deficit in the social security system (Bergman et al., 2016). The revenue losses will affect the key sectors in the country’s economic stability, a move that will directly impact the lives of the citizens. Therefore, the tax-cutting system will affect the social security Medicare policy system in a great measure in the country.
Thirdly, the long-term budget deficit will remove future revenue for the tax-deferred retirement accounts in the country. There is a revenue tax problem that has affected the economic stability of the organization. For instance, in the United States, there are cases of fiscal gap calculations challenges that have occurred a move that has tremendously affected the revenue structure of the country from one perspective to another (Nasution 2017). The long-term fiscal gap has affected the budget deficit projection of the United States government to a greater extent. The revenue measures will be affected as the number of funds collected from the government will be effectively preserved. The use of long-term deficits can have a detrimental effect on the growth and stability of the economy from one perspective to another. In the past decades, countries such as the United States have consistently run their deficits in managing the operations of the economic activities in the country. The scenario where the government spends more money than it receives from the taxes can be revenue excluding the debt in a given period.
The long-term deficit budget will reduce the national saving, which will reduce the assets that the American residents own. In 2001 the fiscal outlook reduced by 1 percent in 2012, and the national income per household has been estimated to be $2300 (Bergman et al., 2016). The following effects will persist in a given period, which will affect the country’s pro-growth policy factor. In conclusion, a long-term budget deficit has a huge impact on economic stability. Therefore, before a government establishes a long-term deficit program, they need to ensure that all the economic structures have been effectively made in the country.
References
Bergman, U. M., Hutchison, M. M., & Jensen, S. E. H. (2016). Promoting sustainable public finances in the European Union: The role of fiscal rules and government efficiency. European Journal of Political Economy, 44, 1-19.
Nasution, A. (2017). The government decentralization program in Indonesia. In Central and local government relations in Asia. Edward Elgar Publishing.
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