"For this post I agree with your reasoning in the ideal world but I think the world we live in is not so simple. I believe everything we use eventually loses its value to us and that value needs to be re-estabilshed somehow. In many cases materials that have lost value to use may have value to other organisms, which regenerate their value to us. It is interesting to me that you think of a sponge as something that does not become garbage. For example, I wouldn't use a sponge for a year. Also the soap that we use to clean the sponge is not re-usable and I would consider it garbage. So in my mind every comparison always becomes "what is the lesser of two evils." In many cases I believe we agree, if the material cannot be easily utilized by other organisms for something useful then we have thrown a wrench in the works. From a garbage perspective I would be more frightened of a sponge and soap than paper. A sponge is non-biodegradable in most cases (many are made from plastic: http://www.greenlivingtips.com/articles/51/1/Kitchen-sponges.html). The soap has a number of negative effects in aquatic systems. Paper is easily broken down in the environment and can easily be composted. So it again is an issue of what question you ask"
Matt singles out the issue of value as a determining factor in what is considered waste, and what isn't. It is the value of something that makes us re-use it. (Maybe this is part of what TerraCycle uses as its fundamental philosophy.) The generation of entropy is fundamentally a degradation of value - a loss of useful, organised materials to chaos, the degeneration of many forms of energy to heat. Minimising it tries to retain the inherent value of something for longer. But soap is a one-time use good. Its value is gone after water has been added to it, and the suds are on your skin. It is then washed away, and you never see that soap again. So it seems like I have not been accounting for an important item in my waste budget - soap.