THE IMPACT OF GOVERNMENT SPENDING

The Impact of Government Spending

The Impact of Government Spending

Introduction

Background of the Study

The success and progress of any economy is not due to the amount of equality (socialism) that it provides for its citizens but about the lack of limitations on their progress that the particular regime applies. It is most likely that the state directed economy applies greater limitations, but this is not necessarily true. Some state run economy's (such as the Chinese one) have been successful and others took a very long time to finally fail (back in the USSR!). Some market economies are successful too (in the past British managed Hong-Kong for example) but many others experience business cycles and are suffering loss and decay for almost half of each unstable oscillation, as in that older British colony known as the USA today!(Stefan Henrekson 1999).

On the other hand, for any economy to be successful it must provide a high degree of opportunity to work for all of its peoples, and that particularly includes the landless ones, whose opportunities are otherwise very small and who are completely dependent on employment by land owners who are frequently monopolists too. These landless ones are most subject to being poor and unemployed. This measure of equality of opportunity is expressed by the system used in the country to "level the playing field" with greater social justice.

When there are big monopolies of either state run or "freer" corporation managed kinds, the landless worker has to accept what limited jobs they offer and as a consumer has to purchase what ever highly priced goods these same organizations choose to release. By the taxation of land values instead of earnings and goods sales, can this greater freedom be restored and this method is what is used in Hong-Kong and was also successful in Johannesburg SA.

Hypothesis

The Government Does Not Stimulate Economic Growth

Literature Review

In a throwback to the 1930s and 1970s, Democratic lawmakers are betting that America's economic ills can be cured by an extraordinary expansion of government. This tired approach has already failed repeatedly in the past year, in which Congress and the Presiden(DongTaylor Yücel 2003)t:

Increased total federal spending by 11 percent to nearly $3 trillion;

Enacted $333 billion in "emergency" spending;

Enacted $105 billion in tax rebates; and

Pushed the budget deficit to $455 billion in the name of "stimulus."

Every one of these policies failed to increase economic growth. Now, in addition to passing a $700 billion financial sector rescue package, lawmakers have decided to double down on these failed spending policies by proposing a $300 billion economic stimulus bill. Even though the last $455 billion in Keynesian deficit spending failed to help the economy, lawmakers seem to have convinced themselves that the next $300 billion will succeed.

This is not the first time government expansions have failed to produce economic growth. Massive spending hikes in the 1930s, 1960s, and 1970s all failed to increase economic growth rates. Yet in the 1980s and 1990s—when the federal government shrank by one-fifth as a percentage ...