Cut Backs: A Formula For More Cut Backs!

November 5, 2008 | Oakland, California | Vetting explained

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Last updated: November 5, 2008

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Why do governments cut back spending. I believe governments should hold spending steady; even though it seems as though there will be a shortfall of revenue. Once cut are made the next budget will see a short fall of revenue again. However, the hardships would just continue and perhaps move to the bursting point.

In an economy as the USA's the multiplier effect is about 10 to 20. That is when 1$ is spent it goes around for 10 to 20 times before it dies. When the spending is larger, the taxes generated in the diminishing spending could raise sometimes more that the expenditure. So why then do they cut back.

In my opinion, they should seek to be more efficient in their tax collection or citizens should be more honest in paying the taxes. However, they underground economies are diverting legitimate spending and tax generation. Other wise, cut backs are short sighted.

Tags:
economy

Posted in Assignment:
Joe the Plumber

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