The Government’s Impact on Economic Growth
The overall growth in the economy greatly depends on the government involvement. In most countries, the government takes a centre stage in ensuring that there is a steady growth in their economy. While the government is doing all within its reach to ensure economic growth, the high deficits and little government spending may significantly shrinks the economy.
When people say that the government is hurting the economic recovery, they certainly refer to the increased deficits and its scaring uncertainty on future business. The worry is that an increase in the deficits results into increase in interest rates because the government borrowing surpasses that of private borrowers (Finkel, 1997). This trend hinders the growth of businesses and individual investments.
The government is indeed shrinking the economy, and badly. This economic cut down is neither because of overspending nor concerns over future policy, but due to low spending and little investment at all levels of the government. Despite passing some stimulus and policies to help in economic recovery, the government spending and investment since 2010 is contracting. According to Heilbroner & Thurow (1998), a neutral government spending that neither expands nor contracts spurs economic growth. They further argue that such neutral spending is capable of increasing the economic growth by a.235 as opposed to shrinking it by 0.1%. It is observable that the government economic policy over the last three years is counterintuitive.
In conclusion, it can be concluded that the government is shrinking the economy through high deficits and uncertainty on future policies. Moreover, reduced government spending and the low levels of investment, account for the greater percentage of this shrinkage.
References
Finkel, G. (1997). The Economics of the Construction Industry. New York: M. E. Sharpe Inc.
Heilbroner, R. L. & Thurow, L. (1998). Economics Explained: Everything You Need to Know About How the Economy Works and Where It’s Going. New York: Prentice-Hall.
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