The Hill News

Government spending "crowds out" private spending. At best, it transfers a dollar of private spending through taxation to the public sector. However, closer analysis of government spending confirms that it is less efficient in creating income and wealth than private spending. For example, no rational consumer buying a new car would destroy his old car worth $3,000 unless he was given $4,000 of someone else’s money in a “cash for clunkers” program to do so.

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