Why Would the Government Spend Money?
It doesn’t make sense to an individual, really. The last thing a person in debt and out of work would do is open up a credit card and spend his or her way out of the problem. That would be the clear road to bankruptcy for most. So why may it make sense for a government to do just that? • Government spending in the form of an economic stimulus injects money back into the economy, which indirectly results in increased investor and consumer confidence. This ultimately bolsters the stock market. • The government eventually recoups a large portion of the money doled out in the form of taxes.Exactly How Does the Government Get Most of It Back in the Form of Taxes? When the government pays for infrastructure projects, it is essentially loaning stimulus money to the people, not giving it away with no prospect of return. Taxes are incurred at several levels. Consider the tax implications of a scenario where the government pays a business for construction work. • That business is taxed on the in
