Wednesday, 3 January 2018

Charity and fiscal policy

Is fiscal policy some sort of charity done by government? Many people would say that fiscal policy is definitely not charity; however, these two things have many similarities. Firstly, charity and fiscal policy are not always something that has to be done. It is easy to understand why charity is not something that always has to be done, so I am going to explain it. Fiscal policy is also something that a government could have its choice about. On one hand, of course, there are some circumstances when the government has to make certain changes about its fiscal policy, for example, when a country enters a war, the government has to expand its expenditures on national defense. On the other hand, a government is free to make its fiscal policy. For example, a government can choose whether it pays for funding the sustainable energy sector or not. Secondly, charity and fiscal policy could be an action that benefits other parties without considering the cost and benefit of the payers. When a government tends to expand its fiscal expenditures, it only considers the aggregate outputs of the expenditures in the economy and the society rather than the tax incomes. In addition, a government can use expansionary fiscal policies to give more profitable opportunities to many interest parties in the economy without requiring anything back. Therefore, an expansionary fiscal policy is similar to charity.
However, there is a difference between charity and fiscal policy. An expansionary fiscal policy is able to create long term impacts and charity creates immediate and short term impacts. Sometimes the benefits created by fiscal policies would last longer and generate multiplier effects. But this is not always true. For example, charity does not always mean giving away goods, charity also can provide training and education that benefit the people in need for long term. Therefore, fiscal policy and charity still seem very similar in this way.

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