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Chapter 10. What Moves the Markets: Basi... > Government Spending and Taxes

Government Spending and Taxes

Benjamin Franklin said that in this world nothing is certain but death and taxes. If a third thing could be added, it might be that governments will spend more money than they take in.

This is not necessarily a bad thing, especially in a recession. Money from the government is distributed through the social safety net (unemployment insurance, welfare, disability, social security), through contracts (usually for defense and security), and for emergencies (New York received several billion dollars after the September 11 terrorist attacks). This extra money can help keep a bad situation from getting worse by arresting the downward spiral that causes economic depressions. Orders fall, so companies cut workers, who cut consumption. Orders fall again, forcing companies to cut still more workers, and so on and so on.


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