Solutions for Budget Deficit
Budget deficits are common occurrence in today’s modern times because most governments cannot sustain the corresponding level of revenues that’s needed in order to support the budgetary requirements. Budgetary requirements will then be brought and dictated on the rising needs and expectations of a country, government and people, which has a responsibility in meeting and servicing them.
With today’s good economic times which is at the stage of business cycle from expansion to peak, a government revenue is at its highest when the private business sector is not capable of paying more taxes from a good business that’s brought about by favorable economic environment. This actually is axiomatic because during good times, the government have the tendency in correspondingly appropriate more expenses on its budget and at times of increasing its budgetary appropriations in a level which is more than the increase of revenues. This would be why a budgetary deficit still occurs.
To summarize it, a recession or a contraction of the economy with what was reflected in a budget deficit is neither going to be solved by the capping of governmental expenses or on the imposition of more taxes on the taxpayer in raising more revenues. The result with both instances is only prolonging the economic stagnation because there’s no catalysts to rev-up the economy because both of the government and private sectors are holding back on the investments on the case of the government because it is deliberately cutting back on expenses. On the private sector on the other hand, it has been burdened additionally with more taxes.
The government must consider during fiscal deficits and when the economy is sluggish should embark on an expansionary monetary program to which is designed in propel, shore-up and rev-up economic activities, which will extricate the economy from its current economic problem. This kind of expansionist monetary policy consist of the government on increasing the level of money supply in circulation up to a point which is going to enable it to expand its economic activities through investments on income generating ventures, projects and programs.
This in fact can be accomplished with government borrowing against future taxes by selling long-term bonds and securities to the central bank of which shall issue the corresponding new local money. The new local money that had been created then will be used in financing development projects like the construction and establishment of infrastructure and utilities that’s all over the country, which will catalyze growth and expansion and in creating a more favorable business and economic climate in order for private businesses to thrive. With this kind of government assistance and more business opportunities, the private sector will then be able to grow and expand, make more profits, paying more taxes to the government and to employ more people.
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