Tuesday, November 18, 2008

WSJ.com - Why Spending Stimulus Plans Fail

What Congress gives to some it takes away from others. 

Government stimulus bills are based on the idea that feeding new money into the economy will increase demand, and thus production. But where does government get this money? Congress doesn't have its own stash. Every dollar it injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It's merely redistributed from one group of people to another.

Governments don't create new purchasing power out of thin air. If Congress funds new spending with taxes, it is redistributing existing income. If the money is borrowed from American investors, those investors will have that much less to invest or to spend in the private economy.  
In reality, economic growth -- the act of producing more goods and services -- can be accomplished only by making American workers more productive.

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