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HOW PUBLIC-SECTOR SPENDING AFFECTS THE ECONOMY
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.

RESOURCES:

The Impact of Government Spending on Economic Growth
By Daniel Mitchell
March 15, 2005

Why Government Spending Does Not Stimulate Economic Growth: Answering the Critics
By Brian Riedl
January 5, 2010

Three Million Jobs: Really?
By Veronique de Rugy
July 14, 2010

Do We Deserve Our Fate?
By Walter E. Williams
June 1, 2011


PUBLIC-SECTOR EMPLOYEES:

Government Employees: The True 1 Percent
By Wayne Allyn Root
March 2, 2012

How Much Do You Owe Government Workers?
By Steven Malanga
May 9, 2012


THE 2010 OBAMA BUDGET:

Federal Spending by the Numbers: 2010
By Brian Riedl
June 1, 2010


WELFARE SPENDING UNDER PRESIDENT OBAMA:

Uncovering the Hidden Welfare State: 69 Means-tested Programs and $940 Billion in Annual Spending
By Robert Rector
April 5, 2011


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