Wednesday, May 30, 2012

Government Spending and Economic Growth

Interesting article at Cato ( looking at the relationship between state spending (in the US) as a percentage of GDP and annual economic growth and employment. Looking at the data provided you can see which way the relationship goes - more state spending leads to lower growth and lower employment. Just  how big is the relationship?

So, increased state spending is strongly correlated with decreased annual growth, and with decreased employment. And of course employment is even more strongly correlated to economic growth.

Forget stimulus, forget the idea that the state will fix everything through the magic in spending and just look at that little table of numbers....

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