Growth of Government Impoverishes You: Striking Evidence from Research
Conservatives in both major parties feel an instinctive distaste for large government. It’s contrary to our constitutional tradition for one thing. For another, one does not enjoy paying taxes to a government that gives daily lessons in ineffectualness and in jolly and mild but massive corruption. (The late Democrat Senator Byrd – the repentant Klansman – was eulogized for giving away your money to his poor state of West Virginia. Much of it was spent on nothing, such as an empty highway.)
There is another reason to dislike big government that is at once more tangible, or more concrete, and more difficult to explain. It’s difficult to explain because the evidence for it comes from studies with methods few people understand. I understand those methods (roughly: “regression analysis”). I used them for thirty years of my professional life. I vouch for them.
Here is the third reason to object to big government:
Government expansion deprives us of economic growth.
Note: If you are uncomfortable with the terms GDP/capita and income per capita, don’t blame yourself. Sue your alma mater and refer to the light-hearted explanation linked to this blog: “Dr J’s List of Words that Make you Sound Smart.” (Link is on the lower right-hand side of blog front page.)
Two Swedish scholars, economists, recently gave in the Wall Street Journal (7/12/10) – a summary of their book on the topic. I quote:
“…when government spending increases by 10% points of GDP, the annual growth rate [of the national economy] drops by 0.5 to 1 percentage point. This may not sound like much but ….To put it in personal terms ….a dip …from 2% to 3% [in national economic growth] would mean an individual income loss of $464 in the first year. Over 30years, a one percentage point difference in the [annual] growth rate of the national economy] translates roughly to $354.000 in lost income per person.”
The suspension points above are mine. They indicate simplified sentences. The bracket are mine too. They denote clarifications I added. You don’t have to worry about either. I understand the WSJ report perfectly and I never lie or distort.
Here is another way to express the same thing:
If the federal government takes 45% of everything produced by all Americans rather than the current 35% (roughly), it will cost the average American couple the price of two or more houses, depending on the part of the country they live in.
This is not peanuts. This is not erosion at the margin. It’s a whole lifestyle and our capacity for personal autonomy that are at stake.
Such an increase in the share the federal government takes for itself is not out of the question. The Swedish government’s share is about 55%.
Now think of the implications of this robbed economic growth from the standpoint of “social justice,” the excuse liberals give for their dishonest economic policies. The above estimate is a mean, an average. Of course, the rich lose more than the poor in absolute terms when the economy fails to grow. They might be deprived of a new mansion, for example. (I am thinking of Al Gore’s mansions.) The poor lose the ability to buy a home altogether. Who, in your opinion, suffers the most when the economy grows slowly: A rich man who can’t afford a second mansion at the beach or a working family reduced to renting forever?
Of course, the answer is subjective. It does not mean you can’t try. Force your liberal acquaintances to answer. It’s fun to see them squirm, get red in the face, stomp out, or look at you dumbly. (Happens more and more these days, or am I just dreaming?)
The facts for this column are cribbed from: “Lessons from the Swedish Welfare State.” by Swedish scholars Andreas Bergh and Magnus Henrekson, based on their book: Government Size and Implications for Economic Growth. (AEI Press, 2010)