Home Business & Finance Principles of Public Finance
Understanding Fiscal Management
The Problem of Public Debt Issuance
Government spending may be financed by taxes or public debt issuance. Government deficit is the difference between tax revenue and spending. The deficit is financed by public debt issuance, which involves borrowing money from the private sector. Many developed countries, including Japan, have suffered from fiscal deficits for many years. They have accumulated a large amount of public debt outstanding. In this chapter, we investigate the positive and normative aspects of fiscal management with deficits and public debt issuance, based on the analytical results of prior chapters.
Many people believe that fiscal deficits and public debt issuance are harmful in themselves. The fiscal authority usually considers that the target of fiscal consolidation is the elimination of fiscal deficits and the cessation of the new issuance of public debt simply because public debt can create bad and serious outcomes. In this context, it is said that there are several difficulties with regard to public debt. Among them, the following are the most notable.
© Springer Science+Business Media Singapore 2017
T. Ihori, Principles of Public Finance, Springer Texts in Business and Economics, DOI 10.1007/978-981-10-2389-7_6
if the productivity of public investment is low. Then, even construction bonds do not provide a net benefit for future generations.
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