Chart Summary

This chart is from The Size and Functions of Government and Economic Growth study performed for for the Congressional Joint Economic Committee.  The chart summarizes the regression analysis performed that shows a negative relationship between the size of government and economic growth. The study included data from over a 36 year period for all industrialized countries. The study also revealed that after 20%, most of the increase in the size of government is due to transfer payments (i.e. welfare programs, corporate subsidies, etc.).

Key Lesson

When governments focus on their primary functions (i.e. rule of law, defense, safety regulations, infrastructure, etc.) the return on government spending is positive. When governments create programs to transfer wealth from one group to another (i.e. welfare programs, corporate subsidies, etc), the return on government spending is negative.