Basically all parties talk about fiscal responsibility but the definition that people have about it can easily vary from one individual to the next. We often see this term used in politics, simply meaning how to use money in a wise manner, without overspending. However, according to Crystal Clanton, there is a much broader spectrum that can involve the entire economy of the country, together with effects put on people.
There are many different things that can be mentioned about fiscal responsibility. Those that can be seen as being very important are the following.
Fiscal Responsibility – Background
Fiscal responsibility practically means money spending. As it was mentioned, meanings can be different based on context. For instance, if you have debts to pay and a family to feed, you need to concentrate on getting rid of the debt as soon as possible. In order to do this you create a budget, which includes amounts that will be spent on family-related things and on repaying debt.
Cutting off luxuries in order to maintain a monthly budget is the best solution to numerous financial problems. Similarly, the government uses taxation restrictions or other related monetary policies.
Fiscal Responsibility And The Government
Interpretation does vary a lot from one person to the next. The neutral view dictates that the government is fiscally responsible. This is true when expenditure is equal to what is gained through taxation. Based on this principle, governments make the choice of increasing taxation or reducing spending. The fiscally irresponsible government is the one that adds new spending ways instead of reducing them as not enough money is available.
The Liberal View
Liberals usually think that national deficit and debt need to be reduced. According to them, this is done through the addition of extra taxes that affect those that are wealthy. Basically, it is believed that those that are rich need to pay more taxes in order to properly increase fiscal responsibility.
The Conservative View
The aim of the conservatives is exactly the same as that of liberals. However, the view is that a balanced budget is the best way to reach that result. Cutting off expenditures made by the government is supported, together with imposing less-stringent regulations for the stimulation of the economy.
The View Of The Economists
Most economists will tell you that national debt is not a part of what most people see as fiscal responsibility. We need to acknowledge the fact that this is a highly controversial topic even among experienced economists. There are economists that justify deficit spending. Others think that a country’s economic growth is always slowed down because of excessive national debt.
Fiscal responsibility is almost always associated with economics and politics but there is presence in finance. The firm is practically seen to be completely fiscally responsible whenever personal debt is reduced. Strict budgeting is also about not adding new projects when financial problems exist. Generally, fiscal responsibility is affecting company finances. A firm’s market position dictates if the company introduces budget surplus or deficit.