A Budget Deficit in the Company - Essay Example

Recognizing that economies are fast becoming more integrated and consolidated through the number of transactions conducted within borders, our company has started to look at the events in the global market which could affect our operations. It has begun to recognize that the competition is global and that competitiveness should be enhanced in order to be on par with larger global players. This called for the installment of world best practices. How does a government budget surplus affect the economy?

How does a government budget deficit affect the economy? During what periods in recent history have the U.S. run budget deficits and budget surpluses? A budget surplus indicates that a company is spending less than what it earns while a budget deficit represents the opposite. In the condition of a budget surplus, the economy is affected as consumption is seen to be lower than expected and the government often needs to stimulate spending by allowing consumers to have lesser taxes. On the other hand, a budget deficit implies that the government will need to borrow money in order to fund its expenditures.

The government also often levies a tax increase in order to finance its projects. In the United States, the budget deficit has been observed from 1993 to 1996 while budget surplus occurs in 1998. Argue in favor of deficit spending on the part of the federal government. Then argue in favor of running government budget surpluses. List the positive and negative aspects of each. Then indicate which policy would be best at this time. A budget deficit is a very potent way of allowing consumers to save.

It should be noted that during a budget deficit, customers anticipate that debt will be paid off through additional taxes in the future. Thus, in order to be able to pay these off, they will be motivated to save. On the other hand, the budget surplus is recommended because the government will not need additional funds which are often acquired.