Does and should the government prop up the economy?

I wonder how much tax money is actually propping up these so called entrepeneurs?

It seems to me that quite a lot of corporations and individuals are directly or indirectly suckling at the government teat. It seems to me that quite a few of the people who identify as right wing also hold government jobs or service government contracts, for example:

Military members
Law enforcement
Public school teachers
Regular general schedule employees
Military contractors
Intelligence and security contractors
Aerospace contractors
Nuclear contractors
Scientists doing government funded research
Civil engineers
All forms of civil construction
Waste management
Oil companies
Corn farmers
Medical industry

That's far from exhaustive but I think it's pretty representative of what I'm getting at.

To me it seems that a lot of the economy is in fact propped up by the federal government.

Which is worse, cutting the governments funds by reducing taxes, the government can no longer afford to pay all these entrepeneurs without printing more money and making us all poorer. Or, recognizing that the government and government services play an important role in both our economy and our lives and paying for it appropriately.

I agree with this statement completely.


I thought I was asking the question head on! The people who stereotypically call for lower taxes and cuts to government spending seem to be the same people who directly benefit from it the most!

In the case of taxes though, I don't think paying arbitrarily more taxes is the right answer but I do believe that we should pay the right amount of taxes to finance what is being spent by the government.

Because we are currently in deficit that means raising taxes to cover what was spent. There's no rule to say we can't lower taxes again later after everything's paid for. When everything is paid for then we can get back to deciding what we really need and want to pay for.

However, in the current debate about the Bush tax cuts expiring it seems that the right wing argument is like this:

Cut government spending enough to be in line with our current taxes and have enough left over to repay the deficit.

By keeping taxes low, entrepreneurs will have incentive to reinvest in the economy and everyone will make more money, including the government who will make more taxes.

This seems sensible at first but I think we have to consider how many of these entrepreneurs are in fact making their money from the federal government, if we cut programs to match taxes how many will lose everything and won't be able to reinvest in the economy.

Does the amount of money reinvested by entrepreneurs who see a net gain from lower taxes equal the amount of money lost by those who go under after their government contracts go away.

Which areas do we choose to cut first?

Farm subsidies, defense contracts, research, oil subsidies, education?

I'm pretty sure that significantly cutting funding in any one of these areas will have far more impact on our economy than whatever gets reinvested by people paying lower taxes. Assuming that's true, our current economy can't support the cutting of services so we have to either raise taxes or print more money. I'm steadfastly against printing more money, so I think it's only sensible to raise taxes.

This is not exactly true. A governments money is the guarantee of the labor of its citizens, the product of its industry, or ownership of natural resources.

We can only ever have a net gain in our countries money when people from another country are willing to give us some of their money (labor, etc) in a trade we profit from.

Propping up is different from stimulating the economy which can have a significant effect on the value of our citizens labor and the product of our industry. For example, if we pay for the education of all of our citizens, they can now be more productive in a way that other countries are willing to pay for and spending on defense allows our government to negotiate more favorable trade deals, which in turn ensures that we profit when trading.

I most certainly agree with disassembling the warfare state, but the welfare state is paltry compared to that and consists of services that citizens of most developed countries take for granted.

This is the disconnect where people begin to point at examples like Somalia and Nigeria. Social services are necessary to ensuring a minimum standard of living and promote returns when disadvantaged citizens become productive in the future.

If you rely on private organizations to fill the gap left by government run social services then we almost certainly will run into dire situations like in most developing nations where there is great wealth disparity.



I'm not sure what you're arguing here, I would think that it's better to do it gracefully and in an orderly fashion but deep spending cuts will have the exact opposite effect. The turmoil created by such an upheaval will have lasting effects on our economy and it's possible that we wouldn't recover for years, this is the logic behind the stimulus.

Obviously spending needs to go down and productivity needs to go up, but first we need to pay for the things we've already bought. The only way to do this is by increasing taxes. If we simply reduce spending then we end up in the tumultuous situation that I believe we want to avoid.

Reducing taxes or keeping them as is (in their currently reduced state) and not cutting spending means we don't pay back our debt and no longer have the liquidity to explore raising our collective standard of living without devaluing our currency further.

*Note: raising our collective standard of living might sound like some communist ideal but there are plenty of "basic" services that are well within the responsibility of government that would raise our standard of living if explored and financed, the national highway system is a great example of that, I'm sure there are others.


Regarding the nature of money.

Fiat currency is of completely arbitrary value except when comparing two fiat currencies against each other.

When trading for goods from another country and receiving their currency in return, you have to consider what you can buy with the money you receive. Basically (for most countries) that money guarantees you the right to purchase goods, labor, or natural resources from the citizens of that country (land is tricky, many countries have prohibitions on foreigners owning land).

When we print our own money and introduce it into our money supply, it devalues the money already in circulation until other countries choose to value our goods and services at a rate that is profitable to us.

So, the only way to have a net gain in the value of our money supply is by trading profitably with other countries (they consider our labor and resources more valuable than their labor and resources).

Now, to say that the government itself has no money ignores the fact that the government is the organization that legitimizes our currency and gives it any value to begin with. In actuality, the government owns all of the money. Luckily, in the USA our government is collectively owned by the people.

Now when it comes to propping up the economy. The government isn't attempting to engage in some game where we simply shuffle money around between taxpayers and government projects. The government is betting that the money it injects (to prop up the economy) will allow our citizens to be more productive and by time the market effects of the increased monetary supply take effect, the value of our labor will be greater than that of our trading partners, in that case we will see a net gain. Of course, it is a bet and the opposite can happen like we have seen in any country that has experienced hyper inflation.