Should the government provide more and more public goods, so that we move increasingly towards a 'welfare state'? Why or why not?
What will be an ideal response?
Answer:
The attempt at the question is as follow :
Explanation:
Public goods are goods which are accessible by everyone in the public and the usage of public goods does not diminish its availability to other people. it is good to provide more public goods which are beneficial so that people in general public can also derive some benefit in terms of health and safety. Some examples of public goods include the military, the public hospital, the public Library, etc. No one should be left out of using all these facilities provided by the government because the motive of providing these public goods are to benefit the public.
However providing these public goods require significant amount of resources from the government such as the government revenue. Government derive it's revenue from the tax payers money that they have collected throughout the year. Using the public funds excessively to build more public goods will mean that government is facing an increasing opportunity cost. The government will find it difficult to allocate money for the short term and the long run, as well as for the current problems or the future growth. There will be dilemma as to whether the money should be spent on providing more schools, more hospitals or build more infrastructure.
If the government provide more of the public goods it will put a strain on the federal finances. This means the government may become inefficient in terms of allocating the resources to places which most need it. Therefore the government will find it difficult to increase more tax to finance increasing number of public goods or leaving the taxation untouched but increasing the borrowing. However increasing the borrowing will incur more interest expenses for the government to service which could be burdensome in the long run.
If government is providing everything for free for the people, there will be less incentive for businesses to operate end the efficiency of production in the economy will go out of the window. This is because there is not many ways to monetize products and services in the economy because the government is already doing it for free.
Therefore I think the government should strike a balance in how it finances the public goods and at the same time it is progressive in the way it spends the money for the future growth.
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