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Yet another argument against Prop224

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RE:	Proof that more govt = less prosperity

A fellow I know on another Forum sent me this (how DOES this girl get any work done??)

Kate O'Brien

April 10, 1998

Less Government, More Growth


Propelled by a confidence that politicians could solve problems, government
spending has soared in the U.S. and other Western countries since 1960. Has
wise "government planning" improved economic performance? Quite the opposite.
Robert Lawson, Randall Holcombe and I recently completed a study on the size
and functions of government for Congress's Joint Economic Committee. Here are
some of our findings:

As the size of government has expanded in the U.S., growth of real gross
domestic product has steadily fallen. Even though the U.S. economy is now
moving into the eighth year of an expansion, the growth of real GDP during the
1990s is only about half what it was during the 1960s and well below even that
of the turbulent 1970s. Likewise, as the size of government in other nations
has increased, economic growth has declined. On average, government
expenditures in the Organization for Economic Cooperation and Development's 23
long-standing members rose to 48% of GDP in 1996 from 27% in 1960. The average
economic growth rate fell from 5.5% in the 1960s to 1.9% in the 1990s.

[RICHARD RIDER NOTE:  In the article is a nice graph, which does not replicate
as email.  So I am putting what the approximate figures are in table form

Governmement Share                  Average Growth of GDP 
of GDP                                       During the Year

25% or less                                 6.6%
25-30%                                       4.5% (approximate)
30-40%                                       3.8% (approximate)
40-50%                                       2.8% (approximate)
50-60%                                       2.0% (approximate)
Over 60%                                    1.6%
As the chart shows, there has is a striking relationship between the size of
government and economic growth. When government spending was less than 25% of
GDP, OECD countries achieved an average real growth rate of 6.6%. As the size
of government rose, growth steadily declined, plunging to 1.6% when government
spending exceeded 60% of GDP.

While growth has declined in all of the OECD countries, those countries with
the least growth of government have suffered the least. Between 1960 and 1996,
the size of government as a share of GDP increased by less than 15 percentage
points in the U.S., Britain, Iceland, Ireland and New Zealand. The average
growth rate for these five countries was 1.6 percentage points lower in the
1990s than in the 1960s. In contrast, the size of government increased by 25
percentage points or more in Denmark, Finland, Greece, Portugal, Spain and
Sweden. The growth rate of these six countries fell by 5.2 percentage points.

In the world's fastest-growing economies, furthermore, the size of government
is small, and there is no trend toward bigger government. On average,
government expenditures in 1995 consumed only 20% of GDP in the five economies
with the most rapid real economic growth rates during 1980-95: Hong Kong,
Singapore, South Korea, Taiwan and Thailand. In these countries, the size of
government in 1995 was virtually the same as in 1975. When we looked at a
diverse group of 60 nations, we found that the negative relationship between
bigger government and economic growth is present in all types of economies.

Many policy-makers seem oblivious to these facts. Even though the evidence
clearly shows that excessive government expenditures are retarding economic
growth, politicians continue to focus on new spending programs, budget
deficits and how to spend a possible surplus. What the U.S. and other nations
need instead is a long-range strategy to reduce the size and scope of

Had the public-sector expansion of the past four decades accelerated economic
growth, politicians would be rushing to take credit. Since the opposite has
occurred, how can we fail to hold them accountable?

Mr. Gwartney is a professor of economics at Florida State University.

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.