Will private market gains from cutting federal spending grow faster than losses from the cuts?

Question by Pete S: Will private market gains from cutting federal spending grow faster than losses from the cuts?
So cutting federal spending in effect lays off federal employees and private market employees who work on corporate contacts that are federally funded. Which means they stop having a paycheck to spend while they look for new work. But if that allows us to cut taxes, then everybody who still has a job keeps more of their paychecks and increase their consumption, creating more jobs. If the damage from the newly unemployed grows faster than the benefits of lower taxes, we lose. Elsewise it is a wining situation. Which way do you think the seesaw tilts, towards gain or loss?

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Answer by NAK
if the federal government cut spending in the US, everyone will suffer mainly because there is very little manufacturing industry. First the country will have to bring back the private sector by lowering taxes (been there already) or add large tariffs on imports to prevent companies outsourcing the labor. This is a consumer nation and a large military equipment producer. The only way to create jobs is to create war and continue deficit spending at all costs. If the deficit spending is eliminated, there will be massive deflation. The Fed is doing all it can to prevent it but eventually they will fail. There is too much supply of everything except the necessities (food). Deflation is the main reason everyone will suffer. Either that or a currency crisis if the Fed launches a 100 trillion dollar QE program.

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One Response to “Will private market gains from cutting federal spending grow faster than losses from the cuts?”

  1. Sienna says:

    If it were true that the gains from federal spending outweigh those from private then
    a) there’d be no need for taxation to fund it because people would pay for it voluntarily, and
    b) there’d be no need for private property, because government could presumptively allocate scarce resources to satisfy the most urgent and important wants of society.

    Belief in the State as the source of all goodness has no basis in reason or evidence. It is worse than a superstition.

    As for the halfwit who painted the Fed as assiduously trying to stop deflation, what an asinine thing to say. The Fed is what has caused the problem with their endless inflation, endless destruction of the currency, endless bubbles, endless booms and recessions and handouts to billionaires. They have no moral or economic credibility whatsoever.

    We need to recognise the Statist belief system for the moonbeam theory of the unweaned that it is.

    Wealth always comes from work, savings and productive activity, never from printing money and forced redistributions. This is not a matter of opinion any more than the laws of physics are, and those who don’t understand it are simply wrong.