Debate -
Is increased government spending the only way out of recession?
When the economy goes into recession, thousands of people lose their jobs and also corporate profits decline. This reduces both the income tax and corporation tax flow to the government. Because of high unemployment, there is increased use of government programs such as social security benefits. In this given situation, is it prudent for governments to increase their spending causing the deficit to spiral, thereby affecting the sovereign debt rating, and in turn causing further damage to the economy? Should not monetary policy actions such as quantitative easing, increased business lending, and reducing the interest rates be enough to stimulate the economy? Or is increased government spending the only way out of a recession?
