Impact of Taxes and Spending and Resources on each other

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The impact of resources on government finances, and vice versa, varies considerably depending on the resource and geographic area in question.  Some resources, like metals and fossil fuels, are highly profitable for private investment, so direct government investment is not required.  Other resources, like water and hydroelectric power, may require extensive government spending on infrastructure like dams and aqueducts.  But even privately-run and -funded resource extraction industries often depend on a government-funded regulatory framework and transportation system.

To complicate matters, the taxes levied from the resource-extraction sector of the economy are an important source of government revenue.  Mostly this is desirable, because it gives state and local governments, in particular, both a reason to maintain the infrastructure that supports extraction and a source of funds for doing so.  The flaw in this relationship, however, is that there is a considerable lag between the spending (or lack thereof) of government funds and any impact on government revenue.  Shortsighted politicians may be tempted to manage budget shortfalls by skimping on necessary work, even though it will have a serious negative impact on economic productivity and government revenue a decade or more later.

At the national level, a great deal of our military budget is dictated by our need to maintain access to resources from around the world.  We spend more on our military than the next ten countries combined.  With the help of our allies, the US Navy acts as the effective guarantor of freedom of the seas for the whole planet.  And we have spent trillions of dollars on either propping up or invading various Middle Eastern countries because of our critical dependence on the oil that flows through the Persian Gulf.


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