Positive And Negative Impacts Of Deficit Spending

Deficit spending occurs when a government's spending exceeds its revenue, creating a debt balance. Deficits are usually measured over a period of one year, a fiscal year. Deficit spending is the same situation as if a person were to spend more than what they have in their bank account, creating a debt. Deficit spending can have positive benefits and negative benefits on an economy.
Running a deficit for a long period of time could potentially be very bad for any country. The interest on borrowed money would continue to accumulate, making the long term debt even larger. Such a crisis would present the policymakers with extremely difficult choices, and would most likely have a significant negative impact on the country. Having the debt get higher

and higher would require the government to raise taxes, and stop the spending for benefits and services (Topoleski, 2014). Also with a large and growing debt, policymakers would be restricted to their tax spending and could not have enough money if an unexpected challenge were to rise. These challenges could include economic downturn or a financial crisis (Topoleski, 2014). These possible challenges would have an even larger negative effect on the economy and on the citizens well being. With the restrictions on spending because of a rising debt could also “compromise national security by constraining defense spending in times of international crisis or by limiting the country’s ability to prepare for such a crisis” (Topoleski, 2014). Many people wonder why they should be worried about deficits, and it could potentially impact their future in a negative way. As a country there can be reasons to run a deficit, for example to finance a war or to deal with natural disasters. Even if the economy is strong and the government decides to run high deficits, dangers could come to the economy. One danger is that deficits can slow down economic growth, which can mean slower productivity growth, a higher unemployment rate, and a reduced labor force. Another danger is a financial danger. The government, like any other person borrowing money must pay interest on it, so the longer it takes to pay it off the more the money grows every second.
Even though deficits are mostly seen as a bad thing, temporary deficits can have their benefits. A recession can occur when the demand for goods and services by consumers, and the net demand from abroad is insufficient to pay for all the output the workers are doing (Aaron, 2014). In this situation people have to be laid off or let go causing the unemployment to rise. During these recessions time, as mentioned above, a government could “jump-start” and economy by increasing spending. The government will continue to spend until consumers “once again have the resources-and the confidence- to start buying more on their own again” (Aaron, 2014).
Our total deficit for America is too high. Because our nation has a high deficit, the borrowed money has interest which is making the total rise everyday. Throughout history the U.S. government has almost “always had a public debt” (Aaron, 2014). During the Revolutionary war the government had to borrow money to finance the war starting one of the first deficits. Our Founding Fathers were determined to pay the debt off and did completely by 1835. Deficits typically rise more during wars and recessions, because of “the large sums the federal government was borrowing at those time” (Aaron, 2014). The future deficits and debts depended on to main numbers: the government's spending and the government's revenues.
In conclusion deficit spending can be used in a positive way and a negative way. It is a great thing when tough times come, but a not so great thing when budget spending gets cut and jobs get lost.