Quote:
Originally Posted by Ignitionnet
Not really. The money for those contracts comes from somewhere. Either as debt which results in interest being paid with taxation from the private sector or directly with taxation from the private sector.
The public sector does not and cannot create wealth as each and every thing they do requires the private sector to fund it. They do nothing more than shuffle money around they do not create it. Quite the opposite the public sector has a negative effect on wealth due to the dampening effects of taxation, bureaucracy, and poorly run public monopolies.
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if we were to assume what is paid in taxes would otherwise have been spent (put back in the economy) then yes you could be right. However i reckon in such a situation too many people would stick it in a bank and save it for a rainy day. Also whilst the state may be inefficient eg. over paying for contracts, they also dont have the burden of needing to make a profit and satisfying shareholders, for this reason the private sector is not always efficient at sharing wealth. The guys on dragons den are a classic example, they dont care about the uk not getting jobs if manufacturing in china makes them an extra 50p on every unit they sell. Without a state we would have more of a situation where by the richest do indeed get richer but the welath doesnt trickle down because they will do whats necessary to maximise personal gain. The state in affect is a forced spread of wealth via taxation and public services. Some companies go bust when they lose state contracts, thats how important they can be. I know a few business owners and one in particular has boasted how he can charge the council 3x what he charges another company for the same work. The extra profit has carried him through through patches numerous times.
I imagine a scenario similiar to medieval times, where rich land owners have their own set of slaves working for them the type of situation we would revert to eventually without a state. The police eg. would be replaced by a private company who would work for the highest bidder as profit is king. So if they cant make money attending a burglary then they wont do it.
Which we come back to the problem, people who pay a lot into the state (high earners) always have a feeling of poor value as the state typically provides more for the poor and vulnerable. But does this mean I dont think the books should be balanced? the answer is no, because it wrecks inflation. So in some respect I do agree with you the budget deficit needs to be fixed. But where we will very likely disagree is how much of it should be achieved by cuts and taxation.