Question

Explain how deficit spending could be a burden to future generations. (Three reasons) Chapter 14

Answer 1

A government generally resorts to deficit financing during the time of depression and unemployment. The deficit in the budget is financed either through borrowing or by using the reserved fund of the government.

When the deficit is covered though borrowing this will impose financial burden on the future generation. The government has to pay the borrowed fund with interest in future date. Thus in future the government imposes more taxes on the future generation. Thus the financial burden on the future generation increases.

The increased spending at present by the government causes the prices to increase in future. Thus inflationary pressure occurs in future. So a present budgetary deficit badly affect the future generation.

If the government uses the budget deficit for the construction of schools, roads, railway and other infrastructure facilities, the future generation will be benefitted. But if the borrowing is used to fiancé current consumption, the future generation will not get any benefit from the increased spending by the government. They simply bear the tax burden.