Should fiscal policy focus on increasing government spending to stimulate economic growth or rather on reducing the budget deficit to avoid excessive government debt?
This question concerns a fundamental decision that a government must make in the face of an economic downturn. On the one hand, increasing spending can help stimulate economic growth, especially in times of crisis. On the other hand, a long-term increase in the budget deficit can lead to an increase in government debt, which may limit the government's ability to invest and pursue a stable economic policy in the future. Research shows that the government can achieve more sustainable economic growth by focusing on gradually reducing the budget deficit instead of aggressively increasing government spending, as long-term debt can lead to destabilisation of public finances and higher debt servicing costs. The choice between increasing spending and reducing the deficit is an eternal dilemma of fiscal policy, especially in the context of sustainable economic development. On the one hand, in crisis situations such as economic recessions, increasing public spending on investment and social support can be an indispensable tool for a rapid economic recovery. On the other hand, excessive debt in the long term can lead to serious problems, such as higher debt servicing costs, reduced scope for future public investment and the possible loss of the state's financial credibility. Therefore, the key to solving this issue is to find the right balance between the two approaches.
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What do you think about this topic?
Please reply,
I invite everyone to the discussion,
Thank you very much,
Best wishes,
I invite you to scientific cooperation,
Dariusz Prokopowicz
Government spending is generally an economic stimulant especially during the sluggish economic period. However it again depends on what sector the government spending is focused on, the proper calculated amount, time of implementation & ensuring there's no undue leakage due to corruption & other forms of criminal abuses
Government spending is the main stimulus for economic growth if directed to the production sector and its development.
Both. Economic spending as this will stimulate economic growth but also reducing government debts thru maximizing the allotted funds for a particular program to be implemented.
Government should have proratize in spending in the sector of beneficial to stimulate income generation as well as support to income generation. If it is well planned reducing government debts.
Dear Researchers, Scientists, Friends,
The research question regarding the priorities of fiscal policy – stimulating growth through increased spending or deficit reduction to avoid excessive public debt – touches upon fundamental dilemmas of macroeconomic management. The presented text accurately describes the opposing arguments and potential consequences of both strategies, pointing to the risks associated with long-term debt. However, it is worth expanding this discussion to include new research questions, such as the conditionality of the effectiveness of individual strategies depending on the phase of the business cycle, the structure of the economy (e.g., the degree of openness, labor market flexibility), the level of existing public debt, and inflation and interest rate expectations. Furthermore, future research could explore optimal fiscal consolidation trajectories, the impact of the quality of public spending on long-term growth, the interactions of fiscal policy with monetary policy in different macroeconomic scenarios, as well as the role of fiscal institutions in ensuring budgetary discipline. I sincerely thank all researchers and scientists for their insightful analyses and contributions to this complex debate. I am open to further scientific cooperation in this crucial field and invite you to continue this important discussion, which is key to shaping stable and sustainable economic policy.
Best wishes,
Dariusz Prokopowicz
In times of sluggish growth, fiscal policy should initially focus on strategic government spending to stimulate demand, even at the cost of short-term deficits, with fiscal consolidation pursued later through improved revenue and efficiency.
The government needs to stimulate the economy by spending in targeted areas of production.
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