- - Thursday, April 4, 2019


On these pages recently, former Wisconsin Gov. Scott Walker, new chairman of the Center for State-Led Debt Solutions, authored an article on the federal Balanced Budget Amendment, Article V State Resolutions Process: “Our Kids Are Counting on Us.”

Mr. Walker made it clear that federal debt will overwhelm us unless we adopt a federal fiscal discipline amendment to control our federal spending and borrowing. The states are close to proposing such an amendment — just six away from the 34 necessary (2/3 of the states per the U.S. Constitution).

But what Mr. Walker and others of us — who are part of this constitutional amendment process under the Article V power of the states — have ignored is whether balancing the budget at today’s spending level would be good for the nation. Or is there another level of total spending (and taxation) that would be better for our nation and our people?

This introduces the concept of the “right size of government.” That is a relatively new discipline among free market economists worldwide who are seeking to find the size of government that maximizes the rate of economic growth of a nation for the benefit of all its citizens.

At an economic growth rate of 4 percent a year, which President Trump achieved for a time last year and which President Reagan achieved for multiple years, beginning in late 1982 continuing to late 2007, the economy doubles every 17 years. After another 17 years, the economy doubles again, making it four times as large. After another 17 years, about half a century in all, the economy doubles again, making it eight times as large as originally.

This is what Mr. Trump means when he says “Make America Great Again.” At the annual economic growth rate for the last several years of the Obama administration — 1.2 percent — doubling the American economy just one time would take 60 years.

Reagan made it clear he believed in “limited government” and worked to achieve it. His tax cuts and budget control led to 25 years of unequalled prosperity for our nation. But he passed from the scene about the time that free market economists worldwide began to develop and confirm the “optimal” or “right size” of government as a share of GDP to maximize economic growth, led by the late great economist from Texas, Gerald W. Scully.

While expert estimates in this field range from 15 percent to 25 percent of GDP as the “right size” target, the consensus seems to be in the 18 percent to 20 percent range. To put this in perspective, the United States currently spends in excess of 40 percent of GDP — about 21 percent federal, 15+/- percent state and local, and 5 percent for the “cost” of private sector/social compliance with regulations at all levels of government.

So U.S. governments collectively engage in public spending that is about double what they should if those governments were “right-sized” at the level of spending we would prefer to maximize economic growth under a “balanced budget amendment.”

On these pages a decade ago, world-class economist Richard W. Rahn penned an article, “The Optimum Government,” in which he said, “Rather than increasing the size of government, the empirical evidence shows that sharply reducing taxes, regulations and government spending down to at least 25 percent of GDP would do the most to spur economic growth and create more jobs over the long run.”

But meanwhile we must deal with a bizarre transformation of the American political system by the American left that does not address America’s most common-sense direction for the future.

The socialist/progressive intellectual adolescents now running the Democratic Party, and — unfortunately — much of the American educational system, treat our enterprise society as the enemy of opportunity and freedom. They are asking for bigger government to provide everything “free,” an end to fossil fuels in the name of fatuous science (global warming), limitless taxes on wealth creators whether they are productive individuals or successful businesses, and forcing all our doctors and nurses to become government bureaucrats in a single-payer health care system.

These “new” Democrats appear to believe that government without limits is desirable if not preferable to the limited government envisaged by our Founders. They have yet to ask the key, relevant question for a free people: “Is there a right (or optimal) size of government toward which we should be working? And if so, what is it?”

“Right-sizing” government is the common-sense solution to controlling excessive government costs and runaway government power. And it assures maximum economic growth of the private sector in which all citizens participate.

It’s not rocket science to conclude that “right-sizing” government should be our national objective if we are serious about maximizing the benefits of a balanced budget amendment for all our citizens.

• Lewis K. Uhler is chairman of the National Tax Limitation Committee and Foundation. Peter J. Ferrara is a senior policy adviser for the Foundation and teaches economics at Kings College in New York.

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