View Poll Results: Does governnent spending produce economic growth?

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  • Yes

    241 68.08%
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Thread: Does governnent spending produce economic growth?

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    Does governnent spending produce economic growth?

    In addition to my regular job, I have been trying to develop a business. I have noticed two years in a row now that I experience a great boost in sales after people get income tax refunds. Now I realize that in that case, mostly people are simply getting back their own money. But it makes me wonder, does government spending produce economic growth? If I understand them correctly, some say that this is never true. What do you think?

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    Re: Does governnent spending produce economic growth?

    Sounds to me like getting a tax refund every month would be a boon to your business. The way to do that might be not to tax so much to start with and avoid the whole refund thing, which sounds suspiciously inefficient.

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    Re: Does governnent spending produce economic growth?

    Start selling arms to the military. Big growth industry.
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    Re: Does governnent spending produce economic growth?

    Quote Originally Posted by MildSteel View Post
    In addition to my regular job, I have been trying to develop a business. I have noticed two years in a row now that I experience a great boost in sales after people get income tax refunds. Now I realize that in that case, mostly people are simply getting back their own money. But it makes me wonder, does government spending produce economic growth? If I understand them correctly, some say that this is never true. What do you think?
    When W gave out those bonus returns, we bought a lawn tractor. We likely would have not bought one at that time if not for the bonus.

    I'd call it temporary economic stimulus. [BTW: any government spending is still your money or chalked up as your debt]
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    Re: Does governnent spending produce economic growth?

    Thanks to ObamaCare, those refunds will be a lot smaller [or nonexistent] for some.
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    Re: Does governnent spending produce economic growth?

    The question is not whether it produces economic growth, the question is....is it the most efficient way to produce economic growth?
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    Re: Does governnent spending produce economic growth?

    Quote Originally Posted by MildSteel View Post
    In addition to my regular job, I have been trying to develop a business. I have noticed two years in a row now that I experience a great boost in sales after people get income tax refunds. Now I realize that in that case, mostly people are simply getting back their own money. But it makes me wonder, does government spending produce economic growth? If I understand them correctly, some say that this is never true. What do you think?
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    Re: Does governnent spending produce economic growth?

    Yes, which explains well why government spending is part of the calculation for GDP, Aggregate Demand, etc.

    However to the OP question, tax refunds are not an example of government spending in these types of equations. All that is happening is people have more available funds to spend once they get their income tax return, and predictably there is an immediate effect on the economy over the 1st quarter and into the 2nd (close to that income tax deadline.) It is just enough to suggest certain business models try to capitalize on that additional income. Anyway, in economics that spending increases from a tax refund falls under consumer spending.

    A better example of government spending equating to increased GDP is an infrastructure or technology investment project. Then the math is applied where you think it would be.
    "Every time something really bad happens, people cry out for safety, and the government answers by taking rights away from good people." - Penn Jillette.

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    Re: Does governnent spending produce economic growth?

    Quote Originally Posted by OrphanSlug View Post
    Yes, which explains well why government spending is part of the calculation for GDP, Aggregate Demand, etc.

    However to the OP question, tax refunds are not an example of government spending in these types of equations. All that is happening is people have more available funds to spend once they get their income tax return, and predictably there is an immediate effect on the economy over the 1st quarter and into the 2nd (close to that income tax deadline.) It is just enough to suggest certain business models try to capitalize on that additional income. Anyway, in economics that spending increases from a tax refund falls under consumer spending.

    A better example of government spending equating to increased GDP is an infrastructure or technology investment project. Then the math is applied where you think it would be.
    The EITC is the second largest welfare program in the country so it is really off the books spending.

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    Re: Does governnent spending produce economic growth?

    Quote Originally Posted by MildSteel View Post
    In addition to my regular job, I have been trying to develop a business. I have noticed two years in a row now that I experience a great boost in sales after people get income tax refunds. Now I realize that in that case, mostly people are simply getting back their own money. But it makes me wonder, does government spending produce economic growth? If I understand them correctly, some say that this is never true. What do you think?
    Wealth and economic growth are produced by industry, by converting labor and raw materials into goods and services that are worth more than what it cost to produce them.

    Government very rarely does that. Government very rarely does anything better, economically, that moving wealth around, consuming some of it in the process. Any wealth that anyone gets from government, is wealth that government took from someone else. Any economic activity that is stimulated in one part of the economy, is at least matched by a suppression of economic activity somewhere else.

    As you correctly understand, the tax returns that that people receive, that spur them to buy stuff, is their own money that government previously took from them. Though it means, at that part of the year, that these people have a sudden short burst of money, stimulating a short burst of spending and economic activity, that is that much less money that they had the rest of the year, reducing by that amount the more steady spending and economic activity in which they would have engaged.
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