This AP article discusses some tax cuts and government benefit programs that may be coming to an end – see if you detect the economic fallacy:
A tax cut that reaches 160 million Americans and government aid for the long-term unemployed will expire at the end of the year – and suck $165 billion out of the economy next year – unless Congress takes action.
The mistake made here by the writer is equating tax increases and the expiration of unemployment benefits as both being funds “sucked out of the economy.”
On the first point, raising taxes certainly drains funds from the economy. Simply put, when people pay more taxes to the government, they have less to save, invest or spend (I’ll leave aside the negative incentives that higher taxes impose upon entrepreneurs and how they depress business expansion and job creation for now).
On the second point, saying that ending some unemployment benefits sucks money from the economy is a false assumption. Where does the AP writer think the money comes from to finance the unemployment checks? Of course, the government must first remove the money from the economy in order to transfer the funds to unemployment benefit recipients. So when it comes to unemployment checks, they represent (at best) a transfer of money from some to others. When some unemployment benefits end, that money is not sucked out of the economy – it merely remains in the economy where it originally was.
This AP writer is either woefully ignorant or being intentionally misleading.