BoredDead
Member
I've been working on a hypothesis as to what taxing and spending does to the unemployment rate in the economy, and here is how it has shaped up so far. I want to debate/discuss it with everyone.
Here is my hypothesis on taxing and spending's effect on the unemployment rate: taxing and spending can create or destroy a net amount of jobs based on the quality of the jobs government creates through spending.
For example, I'm going to say taxing 40,000$ (The per capita personal income, the average amount one job pays I believe) costs one job in the private sector, while the government can counter that by creating one 40,000$ public sector job (salary and benefits total). Or, according to this hypothesis, the government can create 2 public sector jobs that pay 20,000$ each. The important part of this is that government can kill two PS jobs by taxing 80,000$ and making one public sector job that pays 80,000$, which is similar to what the US government is doing now.
My explanation as to why: Taxes in the economy no doubt destroy jobs, this should be obvious, as when you take 1000$ from someone they don't spend it, and the retail service that the money would of gone to doesn't get it, and they see smaller sales, and then they have to downsize. But the other side to taxing is government spending. Money that was previously taxed (not printed or borrowed, hopefully :\ ) is spent and jobs are created through the creation of government jobs, and by giving private sector companies business (causing them to expand). Also, high paying government jobs require higher taxes, thus more killed jobs for less created jobs.
Now, public sector jobs pay vastly more than private sector jobs, 2x more according to the second paragraph of this source. This means according to this hypothesis, the government destroys 2 jobs for every 1 job it creates.
How this can be fixed is to lower the wages and benefits of public sector jobs to their private equivalents, maybe even pay less if we want to lower unemployment further.
Another hole in employment government creates is through entitlements. They cost tax dollars, thus jobs, but no jobs are created with the money.
How that can be solved is by creating "welfare jobs" instead of entitlements. How they would work is that the government would pay a person to work, but they would work under private sector companies.
Obviously an exception would have to be made for the disabled.
What do you guys think?
Here is my hypothesis on taxing and spending's effect on the unemployment rate: taxing and spending can create or destroy a net amount of jobs based on the quality of the jobs government creates through spending.
For example, I'm going to say taxing 40,000$ (The per capita personal income, the average amount one job pays I believe) costs one job in the private sector, while the government can counter that by creating one 40,000$ public sector job (salary and benefits total). Or, according to this hypothesis, the government can create 2 public sector jobs that pay 20,000$ each. The important part of this is that government can kill two PS jobs by taxing 80,000$ and making one public sector job that pays 80,000$, which is similar to what the US government is doing now.
My explanation as to why: Taxes in the economy no doubt destroy jobs, this should be obvious, as when you take 1000$ from someone they don't spend it, and the retail service that the money would of gone to doesn't get it, and they see smaller sales, and then they have to downsize. But the other side to taxing is government spending. Money that was previously taxed (not printed or borrowed, hopefully :\ ) is spent and jobs are created through the creation of government jobs, and by giving private sector companies business (causing them to expand). Also, high paying government jobs require higher taxes, thus more killed jobs for less created jobs.
Now, public sector jobs pay vastly more than private sector jobs, 2x more according to the second paragraph of this source. This means according to this hypothesis, the government destroys 2 jobs for every 1 job it creates.
How this can be fixed is to lower the wages and benefits of public sector jobs to their private equivalents, maybe even pay less if we want to lower unemployment further.
Another hole in employment government creates is through entitlements. They cost tax dollars, thus jobs, but no jobs are created with the money.
How that can be solved is by creating "welfare jobs" instead of entitlements. How they would work is that the government would pay a person to work, but they would work under private sector companies.
Obviously an exception would have to be made for the disabled.
What do you guys think?
That's a good example of what government taxing and spending does, except your missing that the suppliers of the retail goods are more likely to expand. Other than that this is a good representation of what taxing and spending does. It takes money from one place and gives it to another by purchasing goods. It doesn't increase GDP but it doesn't lower it, all taxing and spending does is change what is produced. You are completely right in that stimulating the economy through spending utterly fails. However you are wrong in that government spending hurts the economy. 
