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  • State Spending Cuts Are Key Part of Brightening Our Fiscal Future

    A considerable volume of cross-country analysis has found no positive impact on economic growth from more government spending. Many studies (see here and here, for example) find that government spending actually hurts growth. A recent study by The Heritage Foundation and The Wall Street Journal of economic recovery following the 2008 financial crisis has also found countries with bigger governments growing more slowly.

    Would such adverse effects of spending on growth also be the case in our 50 states? An empirical study published in the journal Public Choice reported evidence that states with larger public sectors tend to have lower economic growth rates. Furthermore, the study found that the negative impact of government spending on growth is considerably larger at the margin. A quick analysis of more recent years’ economic data for the 50 states validates these findings.

    As shown in the chart, on average, states that spent a higher portion of their economy on government programs over the last decade had lower rates of economic growth.

    Reining in mounting government spending was a central theme in last November’s election. It’s quite clear that spending restraint is important both nationally and at the state level. A little healthy competition in cutting budgets among our 50 states may be some of the best medicine for restoring the overall health of our economy.

    Posted in Economics [slideshow_deploy]

    7 Responses to State Spending Cuts Are Key Part of Brightening Our Fiscal Future

    1. Pingback: Tweets that mention State Spending Cuts Are Key Part of Brightening Our Fiscal Future | The Foundry: Conservative Policy News. -- Topsy.com

    2. George Fulmore says:

      So, the theory is that if we lay off a bunch of government workers, that will reduce the cost of government, and that will entice those with money to create new jobs. But why would that be so? If I have had $1 million invested in the stock market over the past year, I've made about $200,000 without taking any risk or doing much of anything. So, why would I want to hire anyone to do anything? I'm making money the way it is. I don't need to hire people to make money. No, if I'm in that position, I want to pay no more taxes than I am paying and/or take no more risk or obligations than I do now. And I'm sure as heck no influenced by the government laying off workers, one way or the other. The argument that I would be is illogical.

    3. George Colgrove, VA says:

      Mr. Fulmore,

      You get rid of government workers – along with pointless and needless regulations, massive taxation, yes the desire for businesses to grow will necessitate the hiring of many people. Also as people (not businesses) just people have more money because they are also paying lower taxes – they will have more money to spend. (You liberals get that because you do have an instinct that governments giving out cash for free is a "stimulant" although that does not work in the same was as government employment does not work)

      Anything the feds or state government does – first takes valuable financial resources from the "free" economy and spend it in a controlled economy. THe bigger the government the more controled the economy gets. Healthy economies operate on the free choices customers make in the market place. Not what a single government body does in contracting with a few companies that are rich campagn contributors to political campagns.

      For every government worker that looses his or her job, there will be three private sector jobs made.

    4. Pingback: Economic Freedom: Key to the 50 States’ Economic Recovery | The Foundry

    5. Pingback: Economic Freedom: Key to the 50 States’ Economic Recovery | The Conservative Papers

    6. Pingback: Economic Freedom: Key to the 50 States’ Economic Recovery | The Conservative Papers

    7. Pingback: Economic Freedom: Key to the 50 States’ Economic Recovery | The Conservative Papers

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