Small government promotes growth

Quantum Windbag

Gold Member
May 9, 2010
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It appears that Romney is wrong, cutting government spending by 5% won't throw us into a recession.

Again.

Confusion reigns supreme. The International Monetary Fund told the U.K. this week that it should cut taxes and boost spending while also praising the fiscal consolidation of 2010, which saw a mere 1% cut from public spending. Labour and Conservative politicians argue over the extreme severity of the coalition's spending cuts while ignoring the fact that the national debt is set to increase to a staggering £1.6 trillion by 2015, from £1 trillion in 2010. A false dichotomy—will "austerity" get us out of the economic crisis or will "growth"?—is posed as if the right answer will somehow lead us out of economic despair.
At a time such as this, we need clarity. We need to know where we want to go—and then to boldly implement the policies that will get us there. For all those who wish to see a return to enduring prosperity, new research published today by the Centre for Policy Studies suggests a simple, specific destination. We find that the size of government as a proportion of GDP is a major influence, controlling for other factors, on a country's rate of economic growth. If you want growth, scaling back the state should be an aim whether you have a deficit or not.
We examined the 28 OECD countries defined as "advanced" by the IMF between 1965 and 2010. Using regression analysis to control for the growth rates of the factors of production (physical capital, labor and human capital) and initial GDP, our results suggest that reducing the ratio of taxes or spending to GDP by five percentage points increases the growth rate of GDP per capita by 0.5 to 0.6 percentage points per year.
A broader sample of all "advanced" countries (again, as defined by the IMF) over the past 10 years seems to support these findings. Over this period, countries whose governments tax and spend less than 40% of GDP have grown more quickly than the big-government countries.
Tim Knox and Ryan Bourne: To Get Growth, Shrink the State - WSJ.com

The full study is here.

Reports - Centre for Policy Studies

They even did a video for the reading challenged posters at USMB.

[ame="http://www.youtube.com/watch?v=-zP2M9_KzwQ"]SMALL IS BEST from the CPS - YouTube[/ame]
 
It appears that Romney is wrong, cutting government spending by 5% won't throw us into a recession.

Again.

Confusion reigns supreme. The International Monetary Fund told the U.K. this week that it should cut taxes and boost spending while also praising the fiscal consolidation of 2010, which saw a mere 1% cut from public spending. Labour and Conservative politicians argue over the extreme severity of the coalition's spending cuts while ignoring the fact that the national debt is set to increase to a staggering £1.6 trillion by 2015, from £1 trillion in 2010. A false dichotomy—will "austerity" get us out of the economic crisis or will "growth"?—is posed as if the right answer will somehow lead us out of economic despair.
At a time such as this, we need clarity. We need to know where we want to go—and then to boldly implement the policies that will get us there. For all those who wish to see a return to enduring prosperity, new research published today by the Centre for Policy Studies suggests a simple, specific destination. We find that the size of government as a proportion of GDP is a major influence, controlling for other factors, on a country's rate of economic growth. If you want growth, scaling back the state should be an aim whether you have a deficit or not.
We examined the 28 OECD countries defined as "advanced" by the IMF between 1965 and 2010. Using regression analysis to control for the growth rates of the factors of production (physical capital, labor and human capital) and initial GDP, our results suggest that reducing the ratio of taxes or spending to GDP by five percentage points increases the growth rate of GDP per capita by 0.5 to 0.6 percentage points per year.
A broader sample of all "advanced" countries (again, as defined by the IMF) over the past 10 years seems to support these findings. Over this period, countries whose governments tax and spend less than 40% of GDP have grown more quickly than the big-government countries.
Tim Knox and Ryan Bourne: To Get Growth, Shrink the State - WSJ.com

The full study is here.

Reports - Centre for Policy Studies

They even did a video for the reading challenged posters at USMB.

[ame="http://www.youtube.com/watch?v=-zP2M9_KzwQ"]SMALL IS BEST from the CPS - YouTube[/ame]

Liberty of the individual is BEST? Who knew? ;)
 

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