Academic journal article The Journal of Social, Political, and Economic Studies

Political Power and Curbing the Growth in U.S. Government Spending

Academic journal article The Journal of Social, Political, and Economic Studies

Political Power and Curbing the Growth in U.S. Government Spending

Article excerpt

A recent study by the Fraser Institute has demonstrated that there is a close relationship between economic freedom and the level and rate of economic growth. Those countries that have the greatest amount of economic freedom experience higher rates of economic growth. According to the study, the six countries that scored the highest in economic freedom were: Hong Kong, Switzerland, Singapore, United States, Canada and Germany. Each of these country's had persistently high economic freedom rankings from 19751995 and all consequently ranked in the top ten in per capita GDP in 1994. Furthermore, no country with a persistently high economic freedom rating from 1975-95 failed to achieve a high level of income. On the other hand, no country with a persistently low economic freedom rating was able to achieve even middle income status. The implication from the Fraser Institute study is that countries that want to experience the greatest economic growth need to find ways to increase their economic freedom through lower taxes, less government and freer trade.'

The United States, for example, while scoring high on economic freedom could do even better if it could control reckless spending and regulation. Few scholars seriously believe that this growth in spending and regulation can be sustained without significantly undermining the economy's productivity and U.S. prosperity.

Reversing government control in the United States has not been easy. Organized interest groups have tremendous influence over political decisions and the centralization of government power highlights this influence. However, in the United States, there is hope. With the losses from excessive federal taxing and spending, people are more receptive to a new understanding of the political process. This understanding can facilitate the political leadership necessary to bring the growth of federal government under control.

Centralization of Political Power in the United States

The problem of an excessive and increasingly out-of-touch federal government is explained by two interconnected problems. First, beginning in the 1930s in the United States, political power has become increasingly centralized in Washington, with the federal government taking over more and more functions that were traditionally not government responsibilities at any level. Second, the federal tax system takes an ever larger percentage of the taxes paid by Americans. It has become a clutter of complexity, imposing huge compliance costs and permeating the economy with tax-induced distortions.

In the United States, the devolution of government functions to the states and federal tax reform are hot topics among those who want to rein in the excesses of the federal government. Unfortunately, devolution and tax reform are being considered separately. This is a mistake. Devolution will be more rhetoric than reality without serious tax reform, which requires shifting more taxing authority and tax revenue back to the states.

When U.S. citizens send most of their taxes to the federal government, state authorities must follow orders from Washington if they want to retrieve their constituents' federal tax dollars. Any project that appeals to federal bureaucrats will be embraced by state officials to recapture tax dollars. Most of the country's tax base has been taken over by the federal government. In 1929, total government receipts in the U.S. were $11 billion and total federal government receipts were $3.8 billion - the federal government took in 34.5 percent of all government receipts.2 In 1991, total government receipts in the U.S. were $1,746.8 billion and total federal government receipts were $1,122.2 billion, or 64.2 percent of the total.3

The transfer of fiscal control from the states to the federal government is even more pronounced when we consider expenditures, which are a better measure of taxation than receipts. In 1929, federal government expenditures were $2. …

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