HOW BIG IS BIG ENOUGH?

"Between the extremes of virtually no government and a pure communist state, how much government is necessary and desirable...?"

The Optimum Government
by Richard W. Rahn

(Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth)

If you knew economic growth and new job creation begin to slow when total government spending is larger than about 25 percent of the economy, and you knew total government spending in the United States is about 36 percent of gross domestic product (GDP), would you propose policies to make government larger or smaller to create more jobs and boost economic growth?

Over the last few decades, many economists have done studies on the "optimum" size of government. A new study just completed shows the optimum size of government is less than 25 percent of GDP.

Optimum is defined as that point just before government becomes so large as to reduce the rate of economic growth and job creation. Governments are created to protect people and property. A government too small to establish the rule of law and protect people and their property from both foreign and domestic enemies is less than optimal.

The American Founding Fathers also believed government.....

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