how about just the tax burden? evidence suggest (Cato journal - I believe the fall 1998-issue) that a tax biurden of around 20 percent of GDP seems to be optimal for economic growth (provided, of course, that it is spent somewhat wisely).
any higher, and economic growth will be reduced Jacob Braestrup International Officer Danish Taxpayers Association > This is a multi-part message in MIME format. > > > > Hello, all. I've been lurking for a while now. This forwarded message is my first post. I thought it was very interesting. BTW, would anyone also care to comment on Mankiw's text as a replacement for the venerable Samuelson? > > ~Alypius Skinner > > > The following is taken from G.Mankiw 'Macroeconomics' Fourth Edition 1999 > The Worldwide Slowdown in Economic Growth > > One of the most perplexing problems that policymakers have faced over the past 20 years is the worldwide slowdown in economic growth that began in the early 1970s. Growth in the United States fell from 2.2 percent to 1.5 percent between 1971 and 1992. > Other countries experienced similar or more severe declines. United Kingdom growth fell from 2.4 percent to 1.8 percent. Japan fell from 8.2 percent to 1.8 percent. Studies have shown that the slowdown in growth is attributable to a slowdown in the rate at which the production function is improving over time. Accumulated over many years, even a small change in productivity growth has a large effect on economic welfare. Real income in the United States today is more than 20 percent lower than it would have been had productivity growth remained at its previous level. Many economists have attempted to explain this adverse change. Here are some of their explanations: > * The composition of the labor force has been changing. The entrance of the younger baby-boom generation into the labor force beginning in the 1970s lowered the average level of experience and, therefore, the productivity of labor. > * An increase in government regulations, such as those to protect the environment, requires firms to use less productive production methods. The regulations reduce growth in productivity and incomes (even if the policy is socially desirable). > * Large changes in oil prices in the 1970s caused by OPEC, the oil cartel, made some of the capital stock prematurely obsolete. Firms may have retired some of their machinery that was heavily dependent on fuel. > * The world has started to run out of new ideas about how to produce. We have entered an age of slower technological progress. > > Which of these suspects is the culprit? All of them are plausible, but it difficult to prove beyond a reasonable doubt that any one of them is guilty. The world wide slowdown in economic growth largely remains a mystery. > . > > -- NeoMail - Webmail
