Running head: MAJOR ECONOMIC DEBATE
Major Economic Debate on balancing Government Budget
MAJOR MACROECONOMIC DEBATE
Balanced government Budget
There are competing schools of thought regarding government budgets. One school
prefers a budget deficit as opposed to the budget surplus favored by the opponents. Budget
deficits and budget surpluses have both advantages and disadvantages.
The advantages of having a budget deficit are that it helps promote economic growth.
The government is able to borrow or increase taxes to generate resources to plug the budget
deficit. The budget deficit creates a debt burden on future generations this allows the government
to invest in infrastructure and other projects required in the short-term without worrying about
balancing its budget. Secondly, budget deficits lower national savings forcing the government to
raise interest rates to finance the budget deficits. Lowering national savings has a negative effect
of slowing down economic growth. Lower capital reserves reduce economic productivity in a
country. The United States operates on a budget deficit financed by foreign countries national
savings. China is the largest taker of treasury bonds offered by the United States government.
Budget deficits are thus essential for a country during war and recession to promote economic
activities (Azzimonti et al, 2016).
On the contrary the proponents of a budget surplus argue that a budget deficit burdens
and impoverishes the future generations because it lowers thei...
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