Volume 4, No. 4 (Winter 2001)
Fiscal policy means simply that the government steals the public’s assets (taxes them), and then either spends the money itself (what is usually termed “government expenditure”) or donates the funds to others (makes subsidies), who then spend them. Clearly, the government may not make expenditures or donations unless someone has already supplied something of value to the market. The demands of the government or the recipients of government funds must always be matched by equally valued supplies. Even with government fiscal policy, it is still the supplies that “create” the demands, and fiscal policy may be seen as mere income redistribution that can have no effect on aggregate output or employment other than those caused by the misallocation of resources they impose on the economy.
