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Slimmer Is Better

Posted By Conn Carroll On June 16, 2008 @ 4:10 pm In Economics | Comments Disabled

Fantastic op-ed on government taxing and spending levels by Centre for Policy Studies fellow Keith Marsden in todays Wall Street Journal. [1] He compared the economic performance of ten countries with “slimmer governments” (Australia, Canada, Estonia, Hong Kong, Ireland, South Korea, Latvia, Singapore, the Slovak Republic and the U.S.) to 10 countries with “bigger governments” (Austria, Belgium, Denmark, France, Germany, Italy, the Netherlands, Portugal, Sweden and the United Kingdom).

The slimmer governments all had government revenue and expenditure levels below 40% of GDP, high personal income tax rates at an average 0f 30%, and corporate tax rates at an average of 22%. The bigger governments had high personal income tax rates at an average of 45%, corporate rates at 29%, and government spending at 48.3% of GDP. The results:

The IMF reports that GDP soared in the slimmer-government group at a 5.4% average annual rate from 1999-2008 (including its forecast for the current year), up from a 4.6% rate over the previous decade.

[Bigger government] investment growth slowed to an average annual rate of 0.8% in 2000-2005, from 4.1% in 1990-2000. Their export growth rate almost halved to 3.1% annually in 2000-2005, down from 6.1% in 1990-2000. The bottom line is a drop in their average annual GDP growth rate to 2.1% in 1999-2008, from 2.3% over the previous decade.


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URL to article: http://blog.heritage.org/2008/06/16/slimmer-is-better/

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[1] Wall Street Journal.: http://online.wsj.com/article/SB121357899416776129.html?mod=opinion_main_commentaries

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