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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: bentway who wrote (530309)	11/18/2009 2:19:15 PM
From: Tenchusatsu	1 Recommendation Read Replies (1) \| Respond to of 1574637

Bentway, > What you consider money "wasted" on social spending ALL ends up cycling back into the economy. Spoken like a true socialist. Tenchusatsu

To: bentway who wrote (530309)	11/18/2009 2:27:59 PM
From: TimF	5 Recommendations Respond to of 1574637

There is no such thing a free lunch. "They spend it" doesn't imply it doesn't have a negative impact on the economy. Their spending is at the expense of the spending of others, or the investment of others. If its investment then its at the expense of a larger amount of future spending supported by the new wealth the additional investment would have generated. And that's just the direct cost. You also have to consider the indirect costs in terms of dead weight loss and negative incentives. Taxes on investment not only reduce it by reducing available investment capital, they also reduce the incentive for it by reducing after-tax returns, they distort it by directing it in ways favored by the tax code, and they tend to chase some of it to places outside the country. Taxes on ordinary income reduce the incentive for extra work and efforts to gain productive skills, by the relatively wealthy, and also have a (smaller) impact on investment (less income leading to less investment funds for people who invest from income, and if the employees demand more money to compensate for their extra taxes, then you impose extra costs, and thus lower after tax returns on businesses). And social programs reduce the incentive for the low skilled poor to work. In some cases the phase in on taxes, combined with the phase out of government benefits means they don't get any extra wealth from efforts to increase their income. This will even be a stronger effect if Pelosicare gets signed in to law. None of which implies we have to get rid of all social programs. For some all of the costs mentioned above might be considered to be worth it. But in calculating whether or not its worth it we have to consider the costs, not just pretend its of no cost because the recipients "cycle the money back in to the economy".