Deficit Spending Pros And Cons

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The term deficit spending means spending more than you make in a certain time frame. The dictionary defines deficit spending as, “the practice of spending funds in excess of income, especially by a government.” Deficit spending is borrowing money to buy something for example such as a mortgage on a house that you don’t have the funds to pay for right then and there and having to pay that money back long term with interest. In order for the US economy to grow, people work and in turn spend money therefore regardless of tax rates; additional tax revenue will be generated. According to ehow.com, “When an individual or organization engages in deficit spending, it can be a sign of budget mismanagement, improper planning or a lack of self-control. Deficit spending is often fueled by debt, which can carry distinct disadvantages for any household or organization. There are both advantages and disadvantages to deficit spending which will be addressed below.…show more content…
“If there is a negative multiplier effect this may actually cause the deficit to increase even more. Therefore in a recession a deficit is necessary to increase AD.” Another advantage to deficit spending is if there is lack of success in a market in the economy for example the public school system the government more than likely will increase spending on this public service. In doing so, this more than likely would cause a deficit but if by increasing spending and the result was increased productivity this would create a higher rate of economic growth and additional tax
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