Not More, Better

Friday, August 1st, 2014

The government spends about 35% of GDP in the US today, Eric Falkenstein notes, and heavily regulates the rest:

It would be far better if, instead of thinking about new tricky ways to squeeze the rich, we instead set government spending to some fraction (say 35%) of the past 5 years of GDP and no more. The endless arguments about the level would stop, and it’s interesting to note that over the past 30 years in the US federal revenues as a percent of GDP has been remarkably consistent across various administrations. By using a moving average of historical GDP this would make spending countercyclical, most importantly instead of politicians being elected for their ability to promise ‘more’ they would instead focus on ‘better.’ That is, it would be nice if the politicians argued about better ways to allocate spending rather than about more or less in aggregate; the net result of the ‘more’ approach has been those who are good at articulating why we need more find they have no idea how to spend it, as when the government had $800B to spend in stimulus, most of it simply went to shoring up state budgets, meaning, state pension deficits, which is just an income transfer to state employees from future taxpayers.


  1. Grasspunk says:

    One side effect would be amazing growth in GDP by redefinition.

  2. Dan Kurt says:

    You fools are worrying about an unlikely problem.

    It is highly likely that an economic collapse followed by war is in our future.

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