Government Spending Effects On The Economy

A government can only be as successful as the people whom it governs. The measure of its success is seen through the quality of life enjoyed by the population, which is obtained with a well balanced budget. This budget is entirely funded by the taxes imposed on the population, which is then allocated to various departments and programs. It goes without saying that the manner in which the government spends its money carries a large influence over the economy, both in the short-term and in the long-term. Although government spending has the potential to stimulate the economy, this essay will explain why the opposite outcome is more likely to result in the short-term. It will be shown, by analyzing the flow of money and the economies of certain countries, that government spending has little economic benefit and does not create new jobs. Nonetheless, in the right circumstances, government spending can prove beneficial to the long-term economic growth of a country.

Before the government can spend any money, it must first acquire that money. A government’s two options is either to increase taxes or to redistribute money from within, from one department to another. Of course, it’s also possible to simply print more money, but that will inflate the dollar and is definitely not the correct way to increase a budget (Ahlseen). Either way, money must be borrowed from somewhere else, either from the population or from the economy. When that money is later reinjected into the economy, its effects are not immediate. Instead, it has negative immediate effects on the taxes, the population’s incentive to invest and the private sector. It has been established that taxes must be increased to provide the government with more spending money. As a r...

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...onomic freedom of a country. Since a government’s income comes from taxes, countries with a high percentage of government spending tend to have lower freedom indexes. The best place to put money is into the hands of the people, who are able to spend it more effectively compared to the government. Throughout this essay, it has been proven that government spending does little to stimulate economic growth. This has been shown by explaining that government spending is simply redistributing money from within the economy and that government spending does not create new jobs. The case where government spending can be beneficial was also explained. This could be accomplished by investing in programs that will increase overall productivity in every sector. Government spending should be viewed in a capitalistic manner. Less government spending entails a more free population.