Government Spending The federal debt keeps rising every year and has changed fro

Question

Government Spending

The federal debt keeps rising every year and has changed from a moral responsibility to a tool used in economic policy. Government spending is used for everything from Medicare and Medicaid to buying books for underprivileged schools. Government spending is used on short-term and long-term projects. After reading “Honey I Shrank the Deficit (But Grew the National Debt)” by David Davenport, what types of projects (short-term or long-term) should government spending be used on and why? Provide examples. Why is it important to lower the national debt? Or, is the national debt just something we pass on to the next generation? What problems does the federal debt establish, even when there is government surplus? Explain the relationship between the federal debt and annual surplus and annual deficits.

Textbook:

Finkler, S. A., Purtell, R.M., Calabrese, T.D., & Smith, D.L. (2013). Financial management for public, health, and not-for-profit organizations (4th ed.). Upper Saddle River, NJ: Pearson Prentice Hall

Explanation / Answer

Govt spending generally is directed towards the weaker section of society but productive spending on the weaker section may leads to crisis in the long run. Govt spending may be divided into the productive and unproductive.

Govt should make expenditure on the productive assests and assets which are important from the nation point view. Project with long gestation period calls for the govt spending else overall growth may be compromised due to lack of interest shown by the private sector.

National debt is a burden on future generation if it is unproductive. On other hand, if debt is spend on productive assets it would automatically will create base for itself.

Debt indicates the fiscal deficit of country.

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