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Why the Cost of Government Is Higher Than You Think

May 28, 2014
6763Gary Galles writes in today's Mises Daily:
The most common examples of politically ignored crowding-out effects are from government fiscal stimulus to “cure” recessions. Such stimulus must be paid for. If financed with current taxation, reduced take-home incomes of those forced to bear the burdens will crowd out some of their spending. If the stimulus is financed by borrowing, savings and investment dollars that would have gone to finance private-sector debt (for factories and other enterprises) will be crowded out by government debt instead. Current borrowing will also require higher taxes in the future to pay off or continue to finance the debt. These future taxes then crowd out future spending and savings.

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