Cons of contractionary fiscal policy:
1. Slowing economic growth: Contractionary fiscal policy aims to reduce aggregate demand, which can result in slower economic growth. This can lead to lower levels of investment, consumption, and employment, ultimately impacting the overall economy negatively.
2. Unemployment: By reducing government spending and raising taxes, contractionary fiscal policy can result in higher levels of unemployment as businesses may cut back on hiring and investment in response to decreased demand.
3. Social unrest: Increased unemployment and decreased government spending can lead to social unrest as individuals and communities struggle to make ends meet. This can have long-term social and political implications.
4. Inequality: Contractionary fiscal policy may disproportionately impact lower-income individuals and families, leading to increased income inequality. This can exacerbate social and economic disparities within society.
5. Reduced public services: A decrease in government spending can result in reduced public services, such as healthcare, education, and infrastructure development. This can negatively impact the overall well-being and quality of life for citizens.