What role does government spending play during times of economic recession?
Answer (2)
During an economic recession, government spending helps boost the economy by increasing demand. When people and businesses spend less, the government can spend more on projects, services, and benefits to create jobs and support incomes. This helps reduce unemployment and encourages more spending, which can speed up economic recovery.
During a recession, when economic activity slows down, businesses earn less, people lose jobs, and spending decreases. In such times, the government plays a critical role by stepping in to stimulate the economy through increased spending.This approach is based on Keynesian economics, which says that when private sector demand is weak, government spending can help fill the gap. The goal is to increase demand, create jobs, and bring the economy back to life.It is very important that the government chooses wisely where to spend money during a recession.Infrastructure projects like roads, bridges, and flood control systemsSocial programs such as cash assistance, feeding programs, and free educationPublic health services, especially during pandemics or disastersFor example, during the COVID-19 recession, the Philippine government passed the Bayanihan to Heal as One Act, which allowed billions in funds for healthcare, cash aid to poor families, and wage support for small businesses. This spending helped many survive the lockdowns and prevented a complete economic collapse.Such spending creates a multiplier effect. When the government hires construction workers, those workers buy food, clothes, and other services. This, in turn, supports other jobs and businesses. More money circulates in the economy, leading to recovery.However, this strategy can also lead to budget deficits—when government spending is higher than its revenue. That’s why it’s important to borrow responsibly and ensure that the spending is efficient and well-targeted.There’s also a political aspect: public spending can be misused through “pork barrel” projects that benefit politicians more than the people. Transparency and accountability are essential to avoid waste and corruption.In summary, government spending is a powerful tool to support the economy during recessions. If used wisely, it can save jobs, protect vulnerable families, and boost long-term growth.
