Government Spending: An Expansionary Fiscal Policy
“On fiscal policy, USC professor's viewpoint is moral and farsighted” by Edward D.
In this article, Kleinbard Challenges reliance on the tax code in order to stimulate the economy. According to Kleinbard (2014), increased government spending is a solution of achieving an expansionary fiscal policy in the American economic system. Moreover, he argues with the progressive tax systems as the only popular way of achieving equitable distribution of resources and growing the economy. Additionally, he mentioned the use of government spending in achieving equity and growth.
Government Expenditure Increase
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When the recession occurs, companies in the private sector experience liquidity trap. The saving levels do have gone above the optimal levels, there is an imbalance between the levels of investments and savings exists. The levels of investments have decreased and leads to a decrease of the aggregate demand. The government mainly borrows from the private sector in order to increase its spending. Government borrowings will help private investors to offset the rising levels of savings. The government will inject the otherwise saved money in the circular flow. Injection of capital in the economy through government investments assists in growing the economy from recession (Alesina, & Ardagna, 2010).
Currently, the gap between the wealthy and the poor is wide. Increased the government expenditure assists in achieving equity without forcing the wealth to stretch their relative capacity. Middle and low-income earners reap more benefits from increased government spending than the wealthy. For instance, government investments on building schools, hospitals, and houses favor the middle and low-income earners than the wealthy, which make it affordable to the middle and low-income earners services offered in public institutions.
Currently, the affluent Americans crowd out the middle and low-income earners resulting to...