Government Spending vs. Tax Cuts vs. Tax Rebates

dollar_sign_melting14 Parts of the United Kingdom are becoming so heavily dependent on government spending that the private sector is generating less than one-third of the regional economy. A new analysis found that the government’s share of output and expenditure is more than 60% in some areas of England and over 70% in some parts of the UK.

And that is what the United States is currently headed towards. All the bailout spending between the banks and the automakers and now the economic stimulus package. Currently, US federal government spending comprises about 26% of our economy. But compare that to the fact that before the FDR’s New Deal, that number was only 3%. Remember, the government is choosing where to spend the money, not you. Where is the FREEDOM in that?

As of right now, consumer spending in the US accounts for 70% of our economy. Not government spending, but spending from you, the consumer. And we are about to pass the largest spending bill in the history of this country. But where is the government going to get this money? From you, the hardworking taxpayers. A pie can only be worth 100%. Right now, the consumers are spending 70% of that pie. If the government wants to increase its spending, guess who has to decrease their spending - you! Eventually in this country, we will reach these levels of parts of the UK, where government spending account for two-thirds of the economy. Just remember to thank your kids and grand kids for picking up the tab for your stupid ass!

If you don’t believe me when I say that government spending isn’t going to stimulate the economy. Well here is a report that will prove me to be correct. Now this report is a bit long, but here are some of the highlights. Our government actually has access to these reports, it’s to bad that they are so power hungry that they are willing to sink this country more just to keep their power and constituents.

Most government spending has historically reduced productivity and long-term economic growth due to:

Taxes. Most government spending is financed by taxes, and high tax rates reduce incentives to work, save, and invest–resulting in a less motivated workforce as well as less business investment in new capital and technology. Few government expenditures raise productivity enough to offset the productivity lost due to taxes;
Incentives. Social spending often reduces incentives for productivity by subsidizing leisure and unemployment. Combined with taxes, it is clear that taxing Peter to subsidize Paul reduces both of their incentives to be productive, since productivity no longer determines one’s income;
Displacement. Every dollar spent by politicians means one dollar less to be allocated based on market forces within the more productive private sector. For example, rather than allowing the market to allocate investments, politicians seize that money and earmark it for favored organizations with little regard for improvements to economic efficiency; and
Inefficiencies. Government provision of housing, education, and postal operations are often much less efficient than the private sector. Government also distorts existing health care and education markets by promoting third-party payers, resulting in over-consumption and insensitivity to prices and outcomes. Another example of inefficiency is when politicians earmark highway money for wasteful pork projects rather than expanding highway capacity where it is most needed.

And then, you might want to take a look at some of these:

Mountains of academic studies show how government expansions reduce economic growth:

Public Finance Review reported that “higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product.”
The Quarterly Journal of Economics reported that “the ratio of real government consumption expenditure to real GDP had a negative association with growth and investment,” and “growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment.”
A Journal of Macroeconomics study discovered that “the coefficient of the additive terms of the government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%.”
Public Choice reported that “a one percent increase in government spending as a percent of GDP (from, say, 30 to 31%) would raise the unemployment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent).”

Read this article from the Heritage Foundation on why Tax Cuts are better than Tax Rebates.

There is only one thing that will solve all of our economic and tax issues, it’s called the Fair Tax Act. Do you know what the Fair Tax is?

* Ensures Social Security and Medicare funding
* Enables workers to keep their entire paychecks
* Enables retirees to keep their entire pensions
* Refunds in advance the tax on purchases of basic necessities
* Allows American products to compete fairly
* Brings transparency and accountability to tax policy
* Closes all loopholes and brings fairness to taxation
* Abolishes the IRS

For more information visit www.fairtax.org.

All information was obtained from boortz.com

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