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What rich countries have in common - Big Gov

slo1
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5/19/2015 12:53:23 PM
Posted: 1 year ago
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

But even if House were correct -- and I think there"s a fair amount of evidence against his claim -- there"s a big problem with his observation. It only holds locally. If you do an empirical study and you find that more government bureaucracy is bad for the economy, what you"ve found isn't that this is true in general -- only that it"s true at one particular moment in time.

If you think about it, it"s easy to find cases where government is too big. That doesn"t mean it"s too big in every case, and should be "drowned in the bathtub," as anti-tax activist Grover Norquist would have it. Look at this chart from the Organization for Economic Co-operation and Development showing government spending as a fraction of gross domestic product among rich countries:
Cowboy0108
Posts: 420
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5/20/2015 10:00:30 AM
Posted: 1 year ago
At 5/19/2015 12:53:23 PM, slo1 wrote:
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

But even if House were correct -- and I think there"s a fair amount of evidence against his claim -- there"s a big problem with his observation. It only holds locally. If you do an empirical study and you find that more government bureaucracy is bad for the economy, what you"ve found isn't that this is true in general -- only that it"s true at one particular moment in time.

If you think about it, it"s easy to find cases where government is too big. That doesn"t mean it"s too big in every case, and should be "drowned in the bathtub," as anti-tax activist Grover Norquist would have it. Look at this chart from the Organization for Economic Co-operation and Development showing government spending as a fraction of gross domestic product among rich countries:


I disagree with the argument. It is showing a correlation, not a causality. It is likely that rich countries only spend more because they are rich, not that spending more makes them rich.
The argument from Bloomberg is actually quite elementary considering that it is usually such a good source.
slo1
Posts: 4,308
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5/20/2015 12:04:29 PM
Posted: 1 year ago
At 5/20/2015 10:00:30 AM, Cowboy0108 wrote:
At 5/19/2015 12:53:23 PM, slo1 wrote:
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

But even if House were correct -- and I think there"s a fair amount of evidence against his claim -- there"s a big problem with his observation. It only holds locally. If you do an empirical study and you find that more government bureaucracy is bad for the economy, what you"ve found isn't that this is true in general -- only that it"s true at one particular moment in time.

If you think about it, it"s easy to find cases where government is too big. That doesn"t mean it"s too big in every case, and should be "drowned in the bathtub," as anti-tax activist Grover Norquist would have it. Look at this chart from the Organization for Economic Co-operation and Development showing government spending as a fraction of gross domestic product among rich countries:


I disagree with the argument. It is showing a correlation, not a causality. It is likely that rich countries only spend more because they are rich, not that spending more makes them rich.

Economics has too many factors to confirm causality in many cases, but the correlation does mean something, if for the fact that the amount of spending is not causing these nations to become poor. As the article points out they have only become richer as spending as part of GDP has increased.

I don't know how he is measuring, "richer", but it makes sense that cutting bare bones gov services is not always the best, especially when commerce takes a hit due to a lack of infrastructure. Small gov is not a wise platform when it becomes a drag on economic activity. The question is when does it become a drag. Unfortunately that is not a detailed topic that politicians and those who support them want to discuss.

The argument from Bloomberg is actually quite elementary considering that it is usually such a good source.

Bloomberg leans right, but does a very good job giving a left viewpoint.
1harderthanyouthink
Posts: 13,098
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5/20/2015 12:45:22 PM
Posted: 1 year ago
At 5/19/2015 12:53:23 PM, slo1 wrote:
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

Right...so the Nordic economies are totally failing...
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dylancatlow
Posts: 12,242
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5/20/2015 3:04:25 PM
Posted: 1 year ago
For various reasons, rich countries are more able to fund social programs than poor countries, and many choose to do so. However, some don't, and they do just as well (if not better) as the countries that do. So there's little reason to think big government promotes economic growth. For instance, you have Switzerland and Luxembourg, which are two of the richest countries in Europe, and they spend significantly less on government than other European countries. You also have Hong Kong and Singapore, which are known for their emphasis on small government, and they do far better than countries like Germany and France with big governments. If big government was really the key to economic success, you wouldn't have countries like South Korea outperforming countries like Spain.
Vox_Veritas
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5/20/2015 3:07:11 PM
Posted: 1 year ago
At 5/20/2015 12:45:22 PM, 1harderthanyouthink wrote:
At 5/19/2015 12:53:23 PM, slo1 wrote:
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

Right...so the Nordic economies are totally failing...

Norway's got oil.
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dylancatlow
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5/20/2015 3:13:22 PM
Posted: 1 year ago
At 5/20/2015 3:07:11 PM, Vox_Veritas wrote:
At 5/20/2015 12:45:22 PM, 1harderthanyouthink wrote:
At 5/19/2015 12:53:23 PM, slo1 wrote:
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

Right...so the Nordic economies are totally failing...

Norway's got oil.

Yeah, that's a fact which people often fail to mention. The other Scandinavian countries aren't exceptionally rich by any means.
Vox_Veritas
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5/20/2015 3:15:52 PM
Posted: 1 year ago
In fact, I heard once that prior to the Gulf War Kuwait had a quite generous welfare system, and that was possible because of their oil money.
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ShabShoral
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5/20/2015 3:16:57 PM
Posted: 1 year ago
They succeed in spite of, not because of, big government. In fact, the only way for big government to survive is for it to rely on the free elements of their citizens. Compare New Deal era USA with the USSR.
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1harderthanyouthink
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5/20/2015 3:48:48 PM
Posted: 1 year ago
At 5/20/2015 3:13:22 PM, dylancatlow wrote:
At 5/20/2015 3:07:11 PM, Vox_Veritas wrote:
At 5/20/2015 12:45:22 PM, 1harderthanyouthink wrote:
At 5/19/2015 12:53:23 PM, slo1 wrote:
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

Right...so the Nordic economies are totally failing...

Norway's got oil.

Yeah, that's a fact which people often fail to mention. The other Scandinavian countries aren't exceptionally rich by any means.

Sweden?
"It's awfully considerate of you to think of me here,
And I'm much obliged to you for making it clear - that I'm not here."

-Syd Barrett

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dylancatlow
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5/20/2015 3:54:12 PM
Posted: 1 year ago
At 5/20/2015 3:48:48 PM, 1harderthanyouthink wrote:
At 5/20/2015 3:13:22 PM, dylancatlow wrote:
At 5/20/2015 3:07:11 PM, Vox_Veritas wrote:
At 5/20/2015 12:45:22 PM, 1harderthanyouthink wrote:
At 5/19/2015 12:53:23 PM, slo1 wrote:
Exerpt

http://www.bloombergview.com...

Today"s conservatives are almost universal in their insistence that big government is bad. Libertarian intellectuals, who drive much of the elite opinion in the conservative movement, will attack the state from any possible angle. And economists, in the past, have sometimes provided the theoretical firepower for those libertarian ideas, making models where markets handle everything in society, and government can only bog things down. My old macroeconomics teacher, Chris House of the University of Michigan, once declared that the economic facts lean to the right.

Right...so the Nordic economies are totally failing...

Norway's got oil.

Yeah, that's a fact which people often fail to mention. The other Scandinavian countries aren't exceptionally rich by any means.

Sweden?

Germany and Australia are just as wealthy, and they spend quite a bit less on government (Australia especially).
darkkermit
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5/20/2015 6:48:46 PM
Posted: 1 year ago
a) Hong Kong, Singapore, and Qatar are the three richest countries in the world yet have the lowest government spending.
b) Again reverse causation. Look at when economic growth occured, not current levels of GDP and see which came first: Government spending or GDP growth. It makes sense too. The more disposable income you have, the less you're likely to complain about taxes. Who do you think is more likely to rebel? Someone making $1 a day and 30% of their taxes go to the government, or someone making $100,000 and 30% of their money going to taxes. I'd also add some other factors where government spending correlates with GDP. High GDP leads to increase in women's rights, and women tend to vote for policies that prefer government spending.

But even if an economy can still be healthy w/ high levels of government spending, that's still no reason that one should prefer it. Just like I could live my life normally if I was mugged every year and 20% of my income is gone. That's no reason why I'd want that to happen to me.
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slo1
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5/26/2015 5:26:59 PM
Posted: 1 year ago
At 5/20/2015 6:48:46 PM, darkkermit wrote:
a) Hong Kong, Singapore, and Qatar are the three richest countries in the world yet have the lowest government spending.
Hong Kong and Singapore also have compulsory savings, which would not fall under gov spending, it should however be considered a tax. In Sinapore it includes healthcare and is something like 30% of one's pay check.

b) Again reverse causation. Look at when economic growth occured, not current levels of GDP and see which came first: Government spending or GDP growth. It makes sense too. The more disposable income you have, the less you're likely to complain about taxes. Who do you think is more likely to rebel? Someone making $1 a day and 30% of their taxes go to the government, or someone making $100,000 and 30% of their money going to taxes. I'd also add some other factors where government spending correlates with GDP. High GDP leads to increase in women's rights, and women tend to vote for policies that prefer government spending.

If you plotted it out, I would imagine GDP, personal wealth, and gov spending all rise together. I don't know that the author is trying to make a causation relationship and is pointing out that it is a correlation. If GDP, personal wealth, and gov spending are correlated, would it not stand to reason that there is other drivers of economic growth other than low gov spending, which is a pillar of conservative economic thought?

But even if an economy can still be healthy w/ high levels of government spending, that's still no reason that one should prefer it. Just like I could live my life normally if I was mugged every year and 20% of my income is gone. That's no reason why I'd want that to happen to me.

Not exactly the greatest analogy, but you should be concerned when gov spending becomes too low and starts causing unintended consequences such as too little investment in infrastructure that private business can not or is not willing to invest in or causing significant social economic distress that causes social uprisings, or does not adequately support defense of the home land, just to name a few.

Let me give a very specific question. What is the economic cost to a nation such as the US or Singapore who both have compulsory savings or taxation schemes for retirement? What is the economic cost without those programs?