Wealth is created in the private sector and
is taxed by government. These tax revenues are then used, in part, to pay the salaries and benefits of public-sector workers, who do not create
wealth but consume it. When a society has a very large public sector (i.e., many tax consumers) and a shrinking private sector (wealth producers), the inevitable result is a debt crisis – high costs coupled with insufficient revenues to pay those costs. When the government creates public-sector jobs by raising taxes, it destroys jobs in the private sector. For every public-sector job
that is created, at least one job is lost in the private sector.
Harvard University economist Robert Barro estimates that,
even in a best-case senario, $1 of government spending will generate
between $0.40 and $0.70 of economic growth, which is much less than the
amount of growth generated by a dollar that is invested in the private sector. Moreover, if that $1 of government spending has previously been taxed, then the overall effect of that spending is a
destruction of $1.10 of economic growth.
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