THE OPTIMUM GOVERNMENT

In a just completed paper, economists at the Institute for Market Economics in Sofia, Bulgaria, have provided new estimates of the optimum size of government, using standard models, with the latest data from a broader spectrum of countries than had been previously available. Their conclusion is that there is a 95 percent probability that the optimal size of government is less than 25 percent of gross domestic product (GDP).

The ramifications of this study and previous ones are important for the current debate going on in the United States and many other countries, about having the government spend more to "stimulate" the economy -- i.e. create jobs and increase growth rates.

Rather than increasing the size of government, the empirical evidence shows that sharply reducing taxes, regulations and government spending down to no more than 25 percent of GDP would do the most to spur economic growth and create more jobs over the long run.

Those members of Congress and parliamentarians in other countries who vote for a "stimulus package" that increases the size of government will be voting for slower economic recovery and higher rates of unemployment over the long run, based on solid empirical evidence.

[This is consistant with the recent OECD {of all organizations} study:

OECD Study Acknowledges Laffer Curve, Admits Progressivity Bad for Growth

and the fact that it's now generally acknowledged that a 20% tax rate is historically optimal, i.e. securing the maximum revenue to the state. Anything above that actually reduces receipts within 2-5 years - but good luck getting the liberal demagogues to admit it. As Obama has said: even if it results in less money to the treasury, he's for them on the basis of 'fairness' {ironic, given that flat tax rates are perfectly progressive/fair}.]

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