In the pleasant but illusory world of “national product statistics,” government expenditures on goods and services constitute an addition to the nation’s product. Actually, since government’s revenue, in contrast to all other institutions, is coerced from the taxpayers rather than paid voluntarily, it is far more realistic to regard all government expenditures as a depredation upon, rather than an addition to, the national product.
In fact, either government expenditures or receipts, whichever is the higher, may be regarded as the burden on private national product, and subtraction of the former figure from Gross Private Product (GPP) will yield an estimate of the private product left in private hands. The ratio of government depredation (government expenditures or receipts, whichever is the higher) over Gross Private Product yields the approximate percentage of government depredation of the private product of the economy. [21] - MNR, AGdepression pg. 291
[21]Generally, government expenditures are compared with Gross National Product (GNP) in weighing the fiscal extent of government activity in the economy. But since government expenditure is more depredation than production, it is first necessary to deduct “product originating in government and in government enterprises” from GNP to arrive at Gross Private Product. It might be thought that total government expenditures should not be deducted from GPP, because this involves double counting of government expenditures on bureaucrats’ salaries (“product originating in government”).
But this is not double counting, for the great bulk of money spent on bureaucratic salaries is gathered by means of taxation of the private sector, and, therefore, it too involves depredation upon the private economy. Our method involves a slight amount of overcounting of depredation, however, insofar as funds for government spending come from taxation of the bureaucrats themselves, and are therefore not deducted from private product. This amount, particularly in the 1929-1932 period, may safely be ignored, however, as there is no accurate way of estimating it and no better way of estimating government depredation on the private sector.
If government expenditures and receipts are just balanced, then obviously each is a measure of depredation, as funds are acquired by taxation and channelled into expenditures. If expenditures are larger, then the deficit is either financed by issuing new money or by borrowing private savings. In either case, the deficit constitutes a drain of resources from the private sector. If there is a surplus of receipts over expenditures then the surplus taxes are drains on the private sector. For a more extended discussion, and a tabulation of estimates of these figures for the 1929-1932 period, see the Appendix.
