Friday, May 25, 2012

Smaller more nimble government?

Would smaller more nimble government help? From the perspective of a small business owner keenly interested in helping governmental entities procure planning, design and construction services more efficiently less government would be better in almost every instance.  The Wall Street Journal Editorial excerpted and linked below indicates smaller government leads to faster growth.  Here in the US we spent almost $1.0 trillion dollars to "stimulate the economy" and the result has been anemic growth at best.  Economic recoveries in the past have been far more robust than the one we are experiencing.  And our friends across the pond are enter the second dip of a double dip recession.

Today's editorial in the Wall Street Journal makes the case for smaller government which, in turn, leads to faster growth. Below is an excerpt from the article and link to the whole article.

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.

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James L. Salmon, Esq.
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