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Could you be more specific about this? I've seen this argument several times, and it always seemed flawed to me. Let's say you cut the budget by X. Part of thi
by radu_floricica 15y ago
Could you be more specific about this? I've seen this argument several times, and it always seemed flawed to me.
Let's say you cut the budget by X. Part of this X (X') doesn't get invested in money making enterprises any more, and less money goes back as taxes (X" less money).
Now, unless the economy is super efficient, I'd say X > X' > X". And given the realities of public government, usually X >> X".
How is then any better to borrow X just to get back X" (and still owe X), then to simply lose X"?
- meric 15y agoYou cut the budget. Some companies go under, increasing unemployment. Unemployed people not produce and do not pay tax, but they continue to consume and receive government services (traffic lights, toilets, parks, police, firemen, etc). To further balance the reduction in tax revenue from the increase in unemployment, you cut the budget some more. Some more companies go under, further increasing unemployment, decrease tax revenue, leading to further budget cuts etc.
- brown9-2 15y agoI think you are missing the downward spiral part of it. Today's budget affects tomorrow's economy which affects tomorrow's budget (through tax revenue), ad infinitum.