Deficit Spending Research Paper

Deficit spending, the amount by which spending exceeds revenue over a particular period of time, is the opposite of government surplus, and a central point of controversy for many economists. By way of simple explanation, as unemployment increases in the United States, the aggregate income of the American public decreases, thus fewer of the population are able to pay its federal taxes. However, life goes on and the federal government must still provide for its citizens. The federal government increases its spending on certain public safety programs, such a Medicaid, as more of the unemployed American public have a need for such programs. Clearly, with tax revenue decreasing and government spending increasing, the federal government must borrow the money from other countries. Thus, deficit spending increases the national debt. Is Deficit Spending the Answer? Casey B. Mulligan. The New York Times. August 22, 2012. …show more content…
Well, obviously if our economy is in a recession and unemployment is at a high, the government cannot raise taxes. This would prove unfruitful and actually further increase unemployment. Raising taxes in this scenario would be what is called a negative multiplier, which would increase the deficit by even more as there would be more government aid needed. So the government must borrow, and usually from foreign countries. The borrowed money can be allocated to spur economic growth. For example, if the government uses the money to create an infrastructure, then there will be an increase in employment of the labor force. Thus, more money will flow back into the economy, which would create an increase in business opportunities and create employment. With enough borrowing, the government could boost itself out of a recession. Deficit Spending. Investopedia