Economic Impacts of Fiscal Deficit | Pros & Cons

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💰 Understanding the Economic Impact of Fiscal Deficit 💼

👋 Welcome to today’s video, where we dive deep into the crucial topic of the economic impact of fiscal deficit. Before we delve into the effects of fiscal deficit, let’s ensure we’re on the same page about what fiscal deficit entails and how it differs from national debt.

📊 Defining Fiscal Deficit: Fiscal deficit occurs when a government’s spending exceeds its revenue intake. This shortfall is often covered through borrowing, typically via issuing government bonds. Over time, prolonged fiscal deficits contribute to a nation’s total national debt.

💡 Insights from the US: Using the United States as a case study, we observe a consistent trend of fiscal deficit since 1970, except for a brief period from 1998 to 2001. This trend has seen the national debt skyrocket from $400 billion in 1970 to a staggering $33 trillion in 2024.

🌍 Global Impact: Notably, events like the COVID-19 pandemic have exacerbated fiscal deficits globally, as governments grappled with reduced tax revenues alongside increased spending on relief efforts.

⏳ Long-term and Short-term Impacts: Moving beyond the surface, we explore the long-term and short-term impacts of fiscal deficits, considering contrasting viewpoints.

📈 Stimulating Growth or Hindering Progress?: One perspective suggests that deficits can stimulate economic growth by boosting demand through government spending. Conversely, another school of thought highlights potential drawbacks, such as "crowding out" private investment and triggering higher interest rates.

💼 Burden on Future Generations: Moreover, excessive deficits may burden future generations through increased taxation or reduced government spending on essential services.

💸 Inflation Risks: Additionally, if governments resort to printing money to finance deficits, it risks fueling inflation, ultimately eroding purchasing power.

🔍 Conclusion: In conclusion, while fiscal deficits can serve as a tool for economic stimulation, prudent management is imperative to mitigate adverse consequences. Join the conversation by sharing your thoughts in the comments below. Don’t forget to subscribe for more insightful analyses on economic matters. 📈🌐

[bhatfarooq]

Zbrdast video
Great animation props
Healthy explanation.

[avnijain-fw]

v well researched video, couldnt find another one like this

[SuperSoldier]

The money to pay taxes and purchase bonds must first be created by the government before anyone can pay taxes or purchase bonds.

Thus, the government could not possibly be taxing or selling bonds in order to get the money it needs to spend, because the government spending has to come first.

The point of taxes and bonds is different than you describe.