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To: MegaSilver
by "dead weight loss" do you mean the use of money spent by the government? Or do you mean the debt the government incurs by spending what it doesn't have?

When the government spends money (even money it doesn't have) it does grow the economy. Things are still being bought and sold. Money is still exchanging hands.

The problem of the government spending money is that it is often done for political reasons instead of economic reasons. This causes resources to be allocated inefficiently. Is this the dead weight you speak of?

When (rational) private entities spend money it is done for economic reasons. This causes resources to be allocated most efficiently.

The more efficiently resources are allocated translates to a better overall standard of living. Incidentally, this is why outsourcing isn't the bogeyman so many think, it is merely allocating resources more efficiently. You may have to get a different/less paying job but everything will be far cheaper. Your salary/cost of living ratio will ultimately be less.

92 posted on 03/04/2004 7:51:55 AM PST by Check_Your_Premises (To crush your enemies, and see them driven before you, and hear the lamentations of the left)
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To: Check_Your_Premises
by "dead weight loss" do you mean the use of money spent by the government? Or do you mean the debt the government incurs by spending what it doesn't have?

Neither. When the government imposes a tax on a good, it has an effect similar to lowering the demand curve or raising the supply curve (depending on who is being taxed, but either way, both the consumer and the producer share the burden of the tax). But it doesn't just cut into the total surplus; it actually creates what's known as a dead weight loss, a piece that goes to neither the consumer nor the producer nor the government. It's gone forever, out of the economy (until you get rid of the tax).

When the government spends money (even money it doesn't have) it does grow the economy. Things are still being bought and sold. Money is still exchanging hands.

Yes, it does, but if that money was being spent in the private sector, the economy would grow even MORE.

108 posted on 03/04/2004 9:02:32 AM PST by MegaSilver
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