Archive for January, 2010

Purchasing Rules – How Government Spending Hurts Many Businesses

January 12, 2010

When government collects tax money and spends it, this hurts many businesses for one simple reason.   Purchasing rules prohibit or make illegal the purchase of many goods and services with tax money.   The businesses that sell these prohibited goods and services must rely upon private sector spending to survive.   Government procurement policies effectively specify that many businesses are economic losers by diminishing economic diversity and the revenue stream for many private sector businesses.   Tax increases further shrink the private sector customer base.

Below is a listing of economic losers that have been created by a county government spending policy.  (Actually,  taxpayers should be glad that their tax money is not spent on  items such as pet care, movies, golf club, sporting equipment, and clothing.)   Money diverted from consumers and taken as taxes becomes unavailable to consumers to spend on items such as pet care, movies, golf club, sporting equipment, and clothing.

As budget pressures drive government bodies at all levels to increase tax revenues, the available pool of private sector business revenues will shrink.  Businesses that qualify for government spending will be the chosen winners.  Businesses that are prohibited from receiving tax money will be the losers in the government purchasing game.

It is often reported that consumer spending drives two-thirds of economic activity.  This suggests that the way to promote a more broadly based economic growth it to shrink the government spending component of GDP.