Supply and Demand of Government Resources

By systematically underpricing the costs of government resources through tax cuts and deficit spending, Republicans have driven up demand and consumption for those government resources.  If taxes were raised to reflect the actual cost of those government services, presumably the demand for those services would decrease.  Granted, different services have different levels of price elasticity, so demand changes would not be uniform across the state sector.  None the less, I think applying a simple microeconomic model to government services like any other good or service is a useful exercise.  In fact, this entire idea underpins Bruce Bartlett’s good attack on Republican “starve-the-beast” ideology.

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Supply and Demand of Government Resources

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