Assume The Government Is Running A Budget Deficit. Should The Government Raise Taxes To Balance The Budget? Should The Government Decrease Spending To Balance The Budget? What Are The Pros And Cons Of Each Action?


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Meg Hayes answered
Quite a few countries in the world are actually in billions of dollars (or pounds) in debt, which means that the government has to make significant cuts to their public spending to try and repay this debt. Although making cuts such as these can sometimes seem like a terrible choice to make, there are some advantages to budget cuts, although these do come with their disadvantages too.

  • Advantage of alternative to raising taxes.
Unlike the federal government, whose budget is allowed to increase depending on their spending, an ordinary local government must cut their spending to suit their budget. This can be done by either cutting the amount of spending that they do, raising taxes that the public have to pay or through a combination of them both. Raising taxes is not something that any government wants to do, as it can make them extremely unpopular.

  • Disadvantage of fewer government services.
Government reductions in spending may affect the scope of a government in charge, but it will also have a significant effect on the public. This may result in a reduction in public spending areas such as garbage collection and free library services and other public services for children and older people. The government that brings in these types of policies may anger the public which results in them being rather unpopular when the next election comes up.

  • Disadvantage of negative economic effects.
Although the overall goal of spending cuts will be to improve the economy by reducing the amount of debt that that country owes, spending cuts can actually result in negative effects on the economy. Government budget cuts inevitably have a bad effect on public spending, which in turn greatly reduces the efficiency of the economy. If the government reduces public spending for the army, then they will have to cut back on the weapons and supplies that they buy, which affect the business which may have to fire workers and possibly go out of business. It is a endless and horrible cycle that is difficult to break.

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