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Posted: July 7th, 2022
Defensive Expenditure and Public Policy
Public policies and projects involve expenditures of various types. Considering the many economic levels involved, it is right to deploy effective expenditure lines or types. Defensive expenditure is mainly applied in government or public projects. It is a line of expenditure primarily concerned with counteractions at all economic levels. Defensive expenditures are referred to as compensatory. This is based on the fact that as much expense is involved, compensation is made part of the project. Taking the provided case of a government program, it was training for low-skilled youths where payment of fees is expected; however, the government still attracts compensation, which is an expense. The expense line does not stop as the trained youths are expected to pay taxes. The taxes get back to other government projects, thus promoting the whole idea of counteractions at various economic levels.
Tax free stipend = $ 4,000
Member Earnings = $ 10,000
Paid taxes = $ 1,000
Apart from the government, companies also apply defensive expenditures as a way of avoiding environmental deterioration. Some of the activities companies engage in expose stakeholders and members of the public to some dangers. On this basis, defensive expenditures are considered to promote the company image by improving society. Defensive expenditure does not improve the welfare of an organization and government directly. Some expenditures come out to counter other outcomes in some economic levels. Defensive expenditure does not directly improve welfare but, on the positive end, avoids a decrease in well – being. Government expenditures must focus on maintaining the well–being of the society at some stable level or line; this is highly achievable through well-structured defensive expenditure.
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