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do govt spending cuts hurt the economy

Ore_Ele
Posts: 25,980
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8/12/2011 3:57:08 PM
Posted: 5 years ago
Spending cuts don't help the economy. The idea is that tax cuts with spending cuts will help the economy (less taxes paid means the tax payers will have more to invest in the economy with).
"Wanting Red Rhino Pill to have gender"
TheAtheistAllegiance
Posts: 1,251
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8/12/2011 3:58:55 PM
Posted: 5 years ago
At 8/11/2011 10:30:30 PM, flames wrote:
cause doesn't it take money out of the economy

and how does spending cuts stimulate the economy

1) The argument is that the money the government uses for spending is being taken from the private sector, which means less demand, investment, etc.

The counter-argument is that those private sector resources weren't doing much good anyway, so the government would be better off using it to directly create jobs or stimulate demand and investment in some way.

And the counter-argument to that is that the government is inherently inefficient and stupid, and thus can't use those resources to intelligently use the money.

2) Spending cuts, from an empirical standpoint, never really stimulate the economy. But, in the long term, the economy might do better because the private sector is using such resources more productively than the public sector.