In “The Price of Government,” I assess the staggering cost of government intervention in economic affairs:
Had the economy of the U.S. not been deflected from its post-Civil War course, GDP would now be more than three times its present level.
I should have referred in “The Price of Government” to an earlier post, “The Laffer Curve, ‘Fiscal Responsibility,’ and Economic Growth,” where I argue that an optimally sized government is one that
divert[s] a minimal fraction of economic output to government (about 15 percent, nowadays), for the purpose of protecting ourselves and our economic activities from predators, foreign and domestic. Any diversion beyond that is pure waste.
Fifteen percent of GDP represents the pre-1929 level (10 percent) plus an allowance for the additional cost of defending the nation in these more perilous times.
I should note that my assessments are consistent with the analysis that is summarized in The Empirical Evidence against Big Government, a presentation of the Center for Freedom and Prosperity. The presentation is based on two Heritage Foundation Papers: “The Impact of Government Spending on Economic Growth” and its “Supplement.”
P.S. In case you’re wondering how government interventions could have cost as much as three-fourths of GDP, consider the cost of just one pending legislative proposal. The cap-and-trade law, aimed at reducing carbon dioxide emissions, would cost between $800 and $3,100 per year, per family. If you think it’s a good idea to impose that cost on your fellow Americans, you have been hoodwinked into believing the myth of man-made global warming, the main supporters of which (surprise! surprise!) are the tax-and-regulate crowd.
Or consider Obamacare, with an advertised cost of about $900 billion over the next 10 years — and that’s before it really starts to get expensive. Moreover, none of the cost estimates for Obamacare reflects an important hidden cost: the damage it would do to the quantity and quality of medical care in the U.S. as drug research diminishes and prospective caregivers seek other, less regulated, occupations.