Some people think the act of government spending a dollar creates value. As if the dollar was not circulated from somewhere prior to ending up in a government account. The idea of a circulatory system for money leads to the metaphor of spending “pressure” drawn from the measure of blood pressure in our circulatory system. Government taking away taxes or going into debt creates pressure on taxpayers to pay it. Simple, right?
And yet a simple evasion is routinely offered—a kind of “economic transubstantiation”[1] where government spending consecrates a new value out of nothing, costing nothing and only giving life to an economy.
However, to the contrary, “Public spending is always a substitute for private spending.”[2] Although ordinary taxpayers have no power or authority to spend their money directly on armies, interstate highways, public schools or police forces, their private money is allocated to do exactly that. Look at where the money comes from. “This is the other side of the coin.”[3] When you are taxed to keep your house, you no longer have that money “at your disposal.”[4] Thus, your savings and wages, dividends, interest earnings or pension income is reallocated from you to a governmental spending unit. This isn’t a gain for you, but a reallocation. If you don’t value the objects of the public spending as much as what you lose in taxes, then you will feel a net loss of your subjective well-being and a constraining weight upon your future outlook.
You will suffer from high Spending Pressure. High governmental Spending Pressure.
[1] See, Stevenson, The Search for the Fountain of Prosperity,” at 3.
[2] Frederic Bastiat, What is Seen and What is Not Seen (1850) Sec. 4 “Theaters and Fine Arts”.
[3] Id.
[4] Id.
