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Solutions for Budget Deficit

Budget deficits are common occurrence in today’s modern times because most governments cannot sustain the corresponding level of revenues that’s needed in order to support the budgetary requirements. Budgetary requirements will then be brought and dictated on the rising needs and expectations of a country, government and people, which has a responsibility in meeting and servicing them.

At the time of good economic times, which is during the stage of the business cycle from expansion to peak, the government revenues is on its highest as the private business sector could pay more taxes from a good business brought by favorable economic environments. This in fact is axiomatic because during good times, the government usually has the tendency to correspondingly appropriate more expenses on its budget and even at times of increasing its budgetary appropriations in levels that are more than the increase on its revenues. This in fact is why a budgetary deficit still occurs.

In order to recapitulate, a recession or perhaps a contraction of the economy which is reflected in a budget deficit is not solved by the capping of governmental expenses or by the imposition of more taxes of the taxpayers in raising more revenues. The results to both instances is only prolonging the economic stagnation due to the reason where there’s no catalysts to rev-up the economy because both of the private and government sectors are holding back on the investments with the government’s case because this is cutting back on expenses. On the private sector on the other hand, it has been burdened additionally with more taxes.

The government must consider during fiscal deficits and when the economy is sluggish should embark on an expansionary monetary program to which is designed in propel, shore-up and rev-up economic activities, which will extricate the economy from its current economic problem. This expansionist monetary policy actually consist of the government and increase the level of money supply to a point where it will enable it to expand the economic activities through investments of income generating ventures, projects and in programs.

This in fact can be accomplished with government borrowing against future taxes by selling long-term bonds and securities to the central bank of which shall issue the corresponding new local money. The new local money that had been created then will be used in financing development projects like the construction and establishment of infrastructure and utilities that’s all over the country, which will catalyze growth and expansion and in creating a more favorable business and economic climate in order for private businesses to thrive. Through such government assistance and business opportunities, the private sector will then be able to grow and also expand, make more profits, employ more people and also to pay more taxes to the government.