The Wall Street Journal reports: “President Barack Obama will call for new government spending on infrastructure, education and research in his State of the Union address Tuesday … Mr. Obama will argue that the U.S., even while trying to reduce its budget deficit, must make targeted investments to foster job growth and boost U.S. competitiveness in the world economy.”
The Obama administration clearly believes that more government spending is necessary for better economic growth. But what does the data say? The 2011 Index of Economic Freedom reports:
Whatever the ideal level of government may be, the political and economic developments of the past year have made clear that in many societies, particularly among the more developed countries, the limits of appropriate or tolerable government spending may have been reached or even surpassed.
Countries that reduced government spending had economic growth rates almost two percentage points higher in 2009 than countries whose government spending scores worsened, and countries with the highest rates of government spending had gross domestic product (GDP) growth rates 4.5 percentage points lower on average than countries where government spending was best contained.
You can read the Index’s chapter on The Limits of Government, here. On how the Index scores Government Spending, here. The entire Index is here.