A Fiscal Policy Tutorial: Everything You Need to Know about the Economics of Government Spending

Almost exactly one year ago, I did a post entitled “A Laffer Curve Tutorial” because I wanted readers to have all the arguments and data in one place (and also because it meant I wouldn’t have to track down all the videos when someone asked me for the full set).

Riders from the fiscal policy short bus

Today, I’m doing the same thing on the issue of government spending. If you watch these four videos, you will know more about the economics of government spending than 99.9 percent of the people in Washington. That’s not a big achievement, to be sure, since you’re being compared to a remedial class, but it’s nonetheless good to have a solid understanding of an issue.

The first video defines the problem, explaining that deficits and debt are bad, but then explaining that red ink is best understood as a symptom of the real problem of too much government spending.

The second video reviews the theoretical reasons why a large public sector undermines prosperity.

The next video examines the empirical evidence, citing both cross-country data and academic research.

Last but not least, the final video looks at the research about the growth-maximizing size of government.

You may have noticed, by the way, that this post does not include any of the videos about Keynesian economics or Obama’s stimulus. That’s an entirely different issue, perhaps best described as being a debate over whether it’s good or bad in the short run to increase the burden of government spending. The videos in this post are about the appropriate size and scope of government in the long run.

This post also does not include the video about fiscal restraint during the Reagan and Clinton years, or the video looking at how nations such as New Zealand and Canada were able to restrain spending. Those are case studies, not economics.