Nov 14, 2020 in Politics

Structural Deficit

Research Paper 3

Solving Structural Deficit Issue in a Town



Building structures are essential for hosting business activities that will further lead to the development of a town by advancement of the lives of locals. Such structures create space for more jobs as well foster innovation among the citizens through the provision of space to nurture talents and put the relevant skills to use. In this regard, as a mayor, I consider that adequate structural buildings should be present to satisfy the need of having offices that will foster the positive changes in town. This paper seeks to explore how to solve the structural deficit that has converted to the serious issue in town, and the majority of people have pushed for the erecting of the same though there is the inadequacy of funds to deal with the issue competently.

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The problem of the structural deficit usually negatively affects the economy and considering this issue will boost employment and output by enhancing business and consumer confidence and reducing uncertainty as well as holding interest rates. In fact, the deficit is structural since the spending of the local government is exceeding the tax revenue by $100,000 with a projection of $1,300,000 and annual town revenue of $1,200,000. Therefore, the structural deficit lies in two uncertainties. Specifically, the first one is the uncertainty of the estimation of the output gap consisting of revenues to it and sensitivities of spending. Therefore, the second one reflects uncertainties surrounding fiscal forecast that holds that borrowing can be reduced by fiscal policy.

In fact, one of the options that can be considered to solve the structural deficit is through borrowing from other sources. Specifically, this variant has got an immediate advantage in that the structural deficit will be addressed, and the businesses will start on. However, the negative issue of this option is that the borrowed money will need to be refunded with interest, and this will be worse than the benefit the structural development will have. In turn, this will burden the economy in the long run, and the net development will be detrimental since it will be presented like working to pay back the borrowed loan .

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To continue, the next option is through the encouragement of foreign investors to have their investments established in the specific area. Undoubtedly, this is the most optimal route to take due to investors having their businesses ongoing in the area/town of concern. In turn, investors will obtain the required building for the types of work they intend to undertake. By this, the issue of structural deficit shall have been solved for good. In fact, the good thing about the foreign investors is that they will tend to more of an asset to the people than a burden. Firstly, the reason to this is that they use their finances to improve the structures; secondly, they will be hiring the local people in the businesses that they undertake. Thirdly, they will be obliged to pay taxes to the local authority as required by the lower classes. Consequently, this shall have solved several problems and as well make the economy grow.

The only inputs that are requirements are the invitation of the relevant foreign investors and providing them with the right conditions to set up their business. The rest of the trouble will be sorted with the advancement of time as the investors grow the business through the involvement of the local people. Moreover, adding the local revenue by the local government is also an option of dealing with the structural deficit through income taxes and local option sales.

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The paper has investigated at solving the problem of the structural deficit with the mayor being responsible for providing the solution and the final results. Two alternatives have been taken into consideration, namely, the option of borrowing to have the problem solved and the invitation of foreign investors to contribute to bringing the solution. In conclusion,the best option has been arrived at as encouraging foreign investors to assist in giving a solution.


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