EMPIRICAL EVIDENCE AND THE SIZE OF GOVERNMENT
If you knew economic growth and new job creation begin to slow when total government spending is larger than about 25 percent of the economy, and you knew total government spending in the United States is about 36 percent of gross domestic product (GDP) - would you propose policies to make government larger or smaller to create more jobs and boost economic growth?
Over the last few decades, many economists have done studies on the "optimum" size of government. A new study just completed shows the optimum size of government is less than 25 percent of GDP. Optimum is defined as that point just before government becomes so large as to reduce the rate of economic growth and job creation.
Rather than increasing the size of government, the empirical evidence shows that sharply reducing taxes, regulations, and government spending down to at least 25 percent of GDP would do the most to spur economic growth and create more jobs over the long run.
There is virtually no empirical evidence - in the United States or anywhere else - to support the belief of economists of the Keynesian school that a big increase in government spending will make matters better, rather than worse.