Posted 02 June 2012 - 08:56 AM
But perhaps we should see what some actual studies have found:"Higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product." -- S.M. Miller and F.S. Russek, "Fiscal Structures and Economic Growth at the State and Local Level, Public Finance Review, March 1997"The ratio of real government consuption expenditure to real DGP had a negative association with growth and investment," and "Growth is inversely related to the share of government consumption in GDP, but insignificantly related to teh share of public investment." -- Robert j Barrow, "Economic Growth in a Cross Section of Countries", Quarterly Journal of Economics, Vol 106 No 2.An increate in [total government spending] by 10 percentage points would decrease the growth rate of [total factor productivity] by 0.92 percent. A commensurate increase of [government consumption spending] would lower the [total factor productivity growth rate by 1.4 percent]." -- P Hansson and M. Henrekson, "A New Framework for Testing the Effect of Government Spending on Growth and Productivity", Public Choice Vol 81.There is substantial crowding out of private spending by government spending... Permanent changes in government spending lead to a negative wealth effect." -- Shaghil Ahmed, "Temporary and Permanent Government Spending in an Open Economy", Journal of Monetary Economics, Vol 17 No 2"The coefficient of additive terms of government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%" -- James S Guseh, "Government Size and Economic Growth in Developing Countries: A Political-Economy Framework", Journal of Macroeconomics, Vol 19 No 1.The estimated effects of [government expenditure variable] are also somewhat larger, implying that an increase in the expenditure ration by 10 percent of GDP is associated with an annual growth rate that is 0.7-0.8 percentage points lower." -- S. Folster and M. Henrekson, "Growth Effects of Govt Expenditure and Taxation In Rich Countries", European Economic Reivew, Vol 45, No 8"A 10 percent balanced budget increase in government spending and taxation is predicted to reduce output growth by 1.4 percentage points per annum, a number comparable in magnitude to results from the one-sector theoretical models in King and Robello" -- Eric M Engen and Jonathan Skinner, "Fiscal Policy and Economic Growth", National Bureau of Economic Research Working Paper, No 4223.And from those right wing kooks at the IMF:"Average grwoth for the preceding 5 year period... was higher in countries with small governments in both periods. The unemployment rate, the share of the shadow economy, and the number of registered patents suggest that small governments exhibit more regulatory efficiency and have less o an inhibiting effect on the functioning of labor markets, participation in the formal economy, and the innovateness of the private sector", -- Vito Tanzi and Ludger Shuknechi, "Reforming Government in Industrial Countries,", IMF Finance and Development, Sept 1996It goes on and on but I'm tired of typing. The evidence is in, it's overwhelming. Government spending is a drain on the economy, during good times and bad.