This will in turn allow the participants in the market to start putting the resources back to work in the sectors that they consider as most beneficial. This paper aims at considering the major roles of the government in the economic stability, with the inclusion of the government-run institutions.
In the previous decades of lecturing countries that are developing on the ways to stimulate economic growth and emerge from economic crisis through strong government policies, some economists and U.S policymakers are discarding all the advice when subjected to the first test of major crisis. This is specifically true when taking advice regarding the accumulation of more debt (Shah, Rajiv, Zhijie, and Harini 85). For instance, the fiscal responsibility summit held by the U.S President Barack Obama last February disclosed that he knows the urgent requirement for fiscal responsibility. But the recent enactment of the Congress of the America Reinvestment and Recovery Act and the budget that was proposed by the government makes the objectives of a budget that is sustainable budget and it addresses the longer-term fiscal properties of the nation such as the entitlement liabilities, and even more elusive.
Government deficits and government spending increase automatically when there are economic downturns that arise due to falling tax revenues and more demands on the social-safety-net provisions. Such spending can be helpful in attaining stability on the economy since it does not occur following legislative acts but automatically, and the money that is spent is usually needed most at the time of spending. Spending and borrowing for the purpose of economy stimulation by the use of legislative discretion is riskier since it is more difficult to wait for the right moment. The spending of the funds does not often take place until a long period has passed after the downturn occurs and has the ability of prolonging the downturn through crowding out