The Reasons Why Government is Overspending

Consumer, Trapped, Consumption, Concept, Shopping Nowadays, people can easily buy anything they want even even if it is not yet payday. If the item is too expensive they can even choose to pay it through installment. These are all  possible because of credit. The problem is that people who are unable to live within their means usually get themselves in trouble. And the worst thing that may happen is that they will live in debt. Hence, wholesale tradelines source is on top of the most search terms nowadays.  The same goes for governments. It is also possible for them to overspend if they failed to budget properly.

If a person spends more than he can afford,  then he will most likely find himself in trouble sooner or later. If you continue doing this, your debt gets bigger and bigger and the portion of your outgo that is interest gets larger and larger and eventually you get to the point where you just can’t pay your bills. And if you can’t pay your electric bill they cut off the electricity.

The situation with the government is also similar with the above mentioned case. If they fail to control how it is being spend, the people who are paying for their taxes may start to rally.

What can the government do in times when the outgo is much greater that the income?

  1. Increase Taxes-  It can increase income by raising taxes. But it is limited in how much it can raise taxes. It can only raise them so far. If it raises them too much it will kill incentive and have a counter-productive effect. Capital will flee the country, go elsewhere
  2. Borrow Money– the government can borrow money to make up the difference between its outgo and income. It borrows money by issuing government bonds. People buy government bonds and thus lend money to the government. But, just as with an individual, if it borrows money, it has to pay interest on that money.
  3. Print Money– government has the authority to print money. Just print a whole lot of unbacked money. Then it can pay its bills with that new money, make up the difference between outgo and income with that. You can get away with this for a while but it always brings disaster if you constantly do it. Many governments have tried it and it always ends in hyperinflation with the money becoming worthless (as happened in Germany after World War I with the German mark).