Cutting Government Spending would Hurt some Businesses


Conservatives and Republicans argue government spending hurts businesses because government spending only crowds out the private sector.  As I have pointed out before crowding out only occurs when the economy is operating at full employment; currently it is not.  The theory argues if government spends money then interest rates will rise and therefore discourage investment.  This could be true, but interest rates are low and are not on the rise anytime soon.  So the crowding out argument is not applicable to our current economy.

However, there is another issue conservatives fail to understand.  Many large businesses and corporations receive a large percentage of their income from government spending.  I do not mean in the form of tax cuts or subsidies or loopholes but the government actually buying products from these firms.  For example 20% of Cisco’s sales are to the government.  27% of Dell’s sales, 30% of Xerox’s sales, 65% percent of Motorola’s sales, 71% of Tetra Tech’s sales and 80% of Illumina’s sales are to the government.  These are just a few examples among many – check out more here. This does not even include the government money spent on private companies, which goes towards national defense.

So to all the conservatives who claim to be pro-business and curse government spending; this is something to think about.  Ask these companies if they want government to cut spending.

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One thought on “Cutting Government Spending would Hurt some Businesses

  1. This just illustrates why government is to big.

    Maybe you should ask these companies if they would rather have an elimination of the 35% corporate tax rate or continue with an unsustainable government customer.

    They are just trying to get some return on their investment in tax dollars.

    Again it feels good in the short-term but it is unsustainable.

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