Individuals differ in the net benefit they receive from governments depending on their tastes for public goods, the taxes they pay, and government demand for goods produced by specific factors they own. It is argued that deficit reduction will be decided on the basis of special economic interests rather than macroeconomic issues. Using the 1977 U.S. input-output table, each of 85 industries are identified as a potential net gainer or loser in the wake of an assumed 10% reduction in federal government expenditures on goods and services. The military hardware industry is the largest loser; the new construction industry the largest gainer. Workers are assumed to have some attachment to their industry and vote for or against deficit reduction based on their self-interest. The median voter experiences a net loss, and losses are more concentrated than gains.
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number
664.