Higher Government Spending Must be Good for Growth Essay

Higher Government Spending Must be Good for Growth - Essay Example That’s why this issue regarding government spending is important, if it’s not done properly, the country might face a serious financial crisis. Types of Government Spending There are numerous sources that enable the government to undertake such a big task. It has to get sufficient amount of funds to be invested for economy’s growth. Some of the areas for Government Spending can be Transfer Payments, Investment, Subsidies and Grants etc. (Alexiou and Anastasiadis 12) Transfer Payments are those unrequited payments as no such money is asked for as an exchange when this payment is made. After setting social welfare programs, Governments redistribute income among the deserving people, and these transfer payments are used to provide these incomes. Subsidies given by the government body should not be mixed with these specific payments given. With sound stewardship, along with a high degree of accountability, transparency and integrity, these transfer payments are manag ed by government (Weinbach and Paul 344). ... Another source for government/public spending is ‘Subsidies and Grants’. Government take out a certain proportion from the capital reserves (money collected from taxes or other financial sources) they already have and then spend a certain amount of this money for the welfare and betterment of the society. Usually, these subsidies and grants are used to industrialize a state and encourage business owners to continue their business and economic activities (Nijkamp and Poot 124). Another source for Government spending can be ‘investment’. Investment is the foundation of Economic Growth and increases standard of living in the long run. Investments in human capital, education, labor skills and training, investment in physical capital, infrastructure and lastly investment in innovation, these all types of investments enables the economy to increase its growth and use its resources in the best possible way. Many of the high-income countries exist due to the presenc e of infrastructure in the country and this is mainly due to the investment that takes place (Wahab 135) Potential Benefits Governments make use of numerous grants and subsidies to support employment in the country, either by subsidizing private companies or by providing employment guarantees to the workers. Government procurement has been extensively used from past many years to require ‘fair wages’ from private contractors. In addition to this, government spending on social security benefits produces extra demand, because it gives greater purchasing and spending power to the citizens who would otherwise have very low real incomes and thus, this extra spending power