Solutions for Budget Deficit
Budget deficit is common in our modern time today because governments are not able to sustain the corresponding level of revenues to which is needed in supporting 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 in fact is why a budgetary deficit still occurs.
In order to recapitulate, a recession or perhaps a contraction of the economy which is reflected in a budget deficit is not solved by the capping of governmental expenses or by the imposition of more taxes of the taxpayers 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 needs to consider during times of fiscal deficits and at times when the economy is on a sluggish mood, embarks with an expansionary monetary program to which is designed in shoring-up, rev-up and propel economic activities, which then will help extricate the economy from the current economic contraction it is in. Such expansionist monetary policy consist of the government in increasing the level of money supply up to a point that will enable it to expand economic activities through investments of income generating ventures, programs and projects.
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 to which had been created is then going to be used in financing development projects such as construction and establishment of infrastructure and utilize which is all over the country that then catalyzes the expansion and growth and also in creating more favorable business and economic climate for private businesses to thrive in. Through such government assistance and business opportunities, the private sector will then be able to grow and also expand, make more profits, employ more people and also to pay more taxes to the government.