Wednesday, October 04, 2006

Excessive Government Spending is the Problem

According to a Heritage Foundation report titled: "Tax Rate Reductions Strengthen the Economy, But Excessive Government Spending Threatens Long-Run Performance,"

The U.S. economy has enjoyed strong growth in recent years, especially compared to the lackluster performance of other developed nations. Unem­ployment is low, income is high, and wealth is at record levels. Government is not the reason for the economy’s growth, but policymakers can improve economic performance by reducing or eliminating barriers to productive behavior. The Bush Admin­istration’s 2003 tax cut—which lowered marginal tax rates on work, investment, and entrepreneur­ship—has encouraged growth and improved com­petitiveness.

Regrettably, the benefits of better tax policy have been undermined, especially in the long run, by excessive government spending. The Bush Admin­istration has presided over a dramatic increase in the burden of government spending. Whether measured in nominal or inflation-adjusted dollars or as a share of GDP, federal outlays have grown at an unprecedented rate. This is harming economic growth because government spending is deter­mined by political rather than economic motives. This results almost inevitably in a less efficient allo­cation of labor and capital compared to what would happen if market forces governed the use of those resources.


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