From: The Desk of Brian M. Riedl
Mountains of academic studies show how government expansions reduce economic growth:
1. Public Finance Review reported that “higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product.”
2. The Quarterly Journal of Economics reported that “the ratio of real government consumption expenditure to real GDP 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 the share of public investment.”
3. A Journal of Macroeconomics study discovered that “the coefficient of the additive terms of the government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%.”
4. Public Choice reported that “a one percent increase in government spending as a percent of GDP (from, say, 30 to 31%) would raise the unemployment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent).”
Economic growth is driven by individuals and entrepreneurs operating in free markets, not by Washington spending and regulations. The outdated idea that transferring spending power from the private sector to Washington will expand the economy has been thoroughly discredited, yet lawmakers continue to return to this strategy. The U.S. economy has soared highest when the federal government was shrinking, and it has stagnated at times of government expansion. This experience has been paralleled in Europe, where government expansions have been followed by economic decline. A strong private sector provides the nation with strong economic growth and benefits for all Americans.
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