Government Spending is Zero-Sum Game; Tax Cuts Are Not

Is the economy a zero sum game? Does the success of one person only come at the expense of another?

It is manifestly obvious that when someone creates wealth by creating some new business, that does not deprive another person of their wealth. By freely exchanging, both sides of the exchange are better off and society as a whole is has more.

However, when a criminal steals, or government confiscates taxes, it is in fact a zero sum game. That is, the criminal’s gain is exactly offset by the victim’s loss. In the same way, government revenues are gained exactly at the expense of the taxpayers loss.

When government spends the money it has collected from the taxpayer, it is not a stimulus, because of this zero-sum game effect. It is like taking water from the deep end of the pool and dumping it into the shallow end. It does not create wealth. That is why is is called “redistribution.” You cannot create prosperity, let alone “stimulate” by moving money around.

Instead you have to create the proper climate for the ingenuity and desire for self betterment of the individual. You do that through protecting private property and contracts, rule of law, and the free market.

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