debt, public: Reasons for Government Indebtedness
Reasons for Government Indebtedness
Governments may borrow to meet temporary needs, as when estimated revenue falls below or is exceeded by estimated expenditures. Short-term treasury notes, payable by increased taxes or by greater economizing, may be issued, but such a debt should not become permanent.
Public debt is advantageous in that part of the national funds are secured at an interest rate lower than that provided to private industry and in that the financial operations of government are funded on a permanent basis. It may also have an expansionary effect on employment and production during times of high unemployment. The disadvantages are that unjustifiable projects may be undertaken because the full burden of payment is postponed; that the government's demands may become so large that the interest rate on government bonds will rise to the point where money is diverted from private enterprise; and that too great a debt may induce governments to depreciate currency or default on obligations.
Sections in this article:
- Introduction
- Payment of the Public Debt
- Forms of Government Indebtedness
- Reasons for Government Indebtedness
- Bibliography
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2024, Columbia University Press. All rights reserved.
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