Positive Effects of Balancing Government Budget Free Essay Example, 750 words

Lecturer: presented: Introduction Prudent budgeting of our personal incomes ensures that we are able to comfortably pay our bills, meet our daily expenses and set aside savings for future investments. This ensures that we are able to live within our means thereby avoiding living in perpetual debts. Spending more than your income is irresponsible and it particularly burdens your dependants and the economy of a country. Balancing our personal budgets is therefore very important because it reflects our real financial expenditure and our total revenues. This makes it possible to control our expenses in order to ensure that areas of priority are not overlooked (Daniel, 2005, p 21). Similarly, governments should balance their budget to ensure that it operates comfortably on its revenues, within its means. Balancing Government Budget Government obtains revenue from three major sources. These are through direct taxes, borrowing, and printing money. When the government imposes taxes, funds from entrepreneurs, businessmen, personal incomes and capitalists are collected. These funds are channeled to the treasury, where politicians and policy makers control on how to spend in a given particular financial year. We will write a custom essay sample on Positive Effects of Balancing Government Budget or any topic specifically for you Only $17.96 $11.86/pageorder now The funds are allocated to ministries, from which each department is required to utilize the funds to meet its operations. This exposes the funds to manipulation, bureaucracy and misuse, resulting in recurring budgetary deficits (Spear, 2007, pp 45-50). Borrowing is the other method which government uses to meet its financial obligations. In this regard, most governments resort to external lenders, while others borrow domestically by floating government bonds to the public and domestic investors. These sources of revenue call for making sound economic judgments, in order to check inflation and subsequent increase in the cost of living. Finally, printing money is the other source of funds whereby the government injects additional currencies in the market. When the market is flooded with money, the purchasing power of the currency reduces. This overtaxes the citizens by drastically reducing the value of their incomes (White, 2006, pp 79-80). In view of these monetary dynamics, government should balance its budget to ensure that it meets its financial obligations, without overburdening the tax payers. Balancing budget enables the government to set and make realist financial judgments, which are not at the expense of the taxpayers. The current global recession has drastically reduced the level of income both at individual and national levels, as a result of job losses and shrinking of major markets. Consequently, the total revenue which the government collects has drastically reduced, while the total expenditure remains high. As a result, most economies are recording negative growth, due to decreasing revenues and the people are experiencing a host of financial challenges. In this regard, balancing government budget would be beneficial in a number of ways. Firstly, it would enable the government to control and critically analyze its spending. This will enable it to prioritize on the most important sectors, for example health, education, housing, security and welfare of workers. This would cushion these key areas from incurring budgetary deficits during periods of financial crises. This would ensure that vital public services are improved and protected at all times (Broch, 2000, pp 51-52). Secondly, balancing budget would enable the government to live within its means. This would be achieved by limiting spending through cost cutting measures on unnecessary expenditure. Savings accrued from these measures could be used in investments, such as creating jobs and improving the infrastructure. In addition, balancing budget would save tax payers substantial amounts of money. When government incurs budgetary deficit, it normally resort to borrowing in order to sustain its operations. In addition, it can increase the money in circulation by printing more currencies. This increases the levels of inflation, which raises the cost of living and doing business (Daniel, 2005, p35). Balancing the budget could ensure that the government builds on its strategic cash reserves, by encouraging fiscal policies which minimize spending and enhance savings. Simply put, balancing budgets ensures that government ministries do not overspend their allocations. Any surplus could be used to settle operating debts and hence reduce dependency on borrowing. In this regard, taxpayers are spared the agony of skyrocketing expenses and the cost of doing business decreases. This encourages savings at personal level, which increase purchasing power of consumers. Conducive investment environment is also established, which in turn create more job opportunities. In conclusion, balancing government budget just as in personal budgets encourages utilization of resources more wisely. The government owes the taxpayers an obligation to use their money on provision of goods and services, which add value to their lives. This improves the quality of life. In addition, should the unexpected happen such as the current economic crisis, well run governments would be able to provide sufficient cover to both businesses and individuals from incurring heavy loses. Personally, I think that if financial budgets and expenditure are not politicized and exposed to bureaucracy, balancing budgets would guarantee quality service delivery to the taxpayers. Bibliography 1. Broch, Schroeder. Business in Perspective: Principles of Budgeting. New York: Russell, Sage Foundation, 2000. 2. Daniel, Wilkinson. Personal Finances: How to get the Most out of Your Paycheck. London: Oxford University Press, 2005. 3. Spear, Waller. Applied Business Continuity Systems: What Does Government taxes mean to your Enterprise? South Africa Business Journal, vol 43, (2007): 45-50. 4. White, Percival. Market Analysis: Its Principles and Methods. London: McGraw- Hill Book Company Inc, 2006.