jdraiman's  Instablog

jdraiman
Send Message
Yehuda “YJ” Draiman - Candidate for Mayor of Los Angeles 2017 YJ Draiman is the lead elected official for the Northridge East Neighborhood Council – NENC, he is also the liaison between the NENC and LADWP. As an Energy Efficiency Advocate YJ Draiman is known for his advancement in implementing... More
My company:
Energy Savers 2
My blog:
YJ Draiman for Mayor of Los Angeles
My book:
American Energy Independence
  • When The Government Spends Trillions Of Dollars It Is Taking It Out Of The Economy Which Diminishes Economic Growth 1 comment
    Nov 30, 2012 3:40 AM

    When the government spends trillions of dollars it is taking it out of the economy which diminishes economic growth

    Why this crowding out of private spending? Government spending comes from three sources: debt, new money, or taxes. In other words, the government can't inject money into the economy without first taking money out of the economy.

    Take taxation: Taxes simply transfer resources from consumers to government, displacing private spending and investment. Families whose taxes have increased will have less money to spend on themselves. They are poorer and will consume less. They also save less money, which in turn reduces the resources available for lending.
    In addition, higher taxation encourages people to change their behavior to avoid taxes. They might switch their efforts to non-taxed activities, such as household production, or to the untaxed underground economy. Economists call this a deadweight loss, because people give up the taxed activity or good they prefer.
    There are high costs to the other options as well. If the government borrows money, that leaves less capital for the private sector to borrow for its own consumption. If the government prints new money, it will create inflation, which reduces the value of the money we own and decreases everyone's purchasing power.
    Overall, government spending doesn't boost national income or standard of living. It merely redistributes it-minus the share it spends on the bureaucracy that collects and spends our tax dollars. The pie is sliced differently, but it's not any bigger. In fact, it's smaller.

    In addition, higher taxation encourages people to change their behavior to avoid taxes. They might switch their efforts to non-taxed activities, such as household production, or to the untaxed underground economy. Economists call this a deadweight loss, because people give up the taxed activity or good they prefer.
    There are high costs to the other options as well. If the government borrows money, that leaves less capital for the private sector to borrow for its own consumption. If the government prints new money, it will create inflation, which reduces the value of the money we own and decreases everyone's purchasing power.
    Overall, government spending doesn't boost national income or standard of living. It merely redistributes it-minus the share it spends on the bureaucracy that collects and spends our tax dollars. The pie is sliced differently, but it's not any bigger. In fact, it's smaller.

    YJ Draiman

    http://yjdraimanformayor.org

Back To jdraiman's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • Re: Israel - To Whom It May Concern In Europe, Asia, The US And Elsewhere: http://seekingalpha.com/p/24otv
    Dec 22, 2014
  • YJ Draiman For Mayor Of Los Angeles 2017 http://seekingalpha.com/p/1ph0p
    Apr 27, 2014
  • Common Sense - An Obituary - Interesting and sadly rather true Today we mourn the passing of a beloved old friend, Common Sense, who has
    Dec 1, 2011
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.