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Archive for May 29th, 2021

When I debate public policy with leftists, I frequently stump them by asking for an example of a country where their ideas have worked.

They get flummoxed for the simple reason that no nation has ever become rich with big government.

There are some rich nations that have big governments, to be sure, but they all became rich in the 1800s and early 1900s, back when government was a tiny burden (and there often were no income taxes).

That’s true for the United States. And it’s true for Western Europe.

It’s also worth noting that places that have become rich in the modern era, such as Hong Kong and Singapore, have small governments and low tax burdens.

I’m making these points because Jim Tankersley of the New York Times has a thorough article on the Biden Administration’s budgetary philosophy.

And that philosophy is based on a completely different perspective. Indeed, the headline and subtitle are a very good summary of the entire article.

Here are some passages that further capture the Biden approach.

President Biden’s $6 trillion budget bets on the power of government to propel workers, families and businesses to new heights of prosperity…by redistributing income and wealth from high earners and corporations to grow the middle class. …it sets the nation on a new and higher spending path, with total federal outlays rising to $8.2 trillion by 2031… That spending represents an attempt to expand the size and scope of federal engagement in Americans’ daily lives… Mr. Biden also seeks to expand the government safety net in an effort to help Americans — particularly women of all races and men of color — work and earn more, rather than relying on corporate America to funnel higher wages to workers. …Mr. Biden is pushing what amounts to a permanent increase in the size of the federal footprint on the U.S. economy. Since 1980, annual federal spending has been, on average, about one-fifth the size of the nation’s economic output; under Mr. Biden’s plans, that would grow to close to one-fourth.

The article is definitely correct about one thing. As I wrote yesterday, Biden wants a big expansion of government spending.

But is he correct about the consequences? Will bigger government “help Americans” and allow more of them to “enjoy prosperity”?

If the evidence from Europe is any indication, adopting bigger welfare states is not a recipe for more prosperity.

For instance, OECD data on “actual individual consumption” show that people in the United States enjoy much higher living standards than their counterparts on the other side of the Atlantic Ocean.

There’s also very powerful data showing that poor Americans (those at the 20th percentile) have higher living standards than most middle-class Europeans.

There’s even data showing that very poor Americans (those at the 10th percentile) have living standards equal to most middle-class Europeans.

The bottom line is that Biden wants higher taxes and more redistribution, but that’s been a big failure in the part of the world that has tried that approach.

Not that we should be surprised. Both theory and evidence tell us that bigger government is bad for prosperity.

P.S. There’s a very sobering example of what happens when a rich nation decides to dramatically curtail economic liberty.

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