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Exchequer

NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

How Much Spending Is Too Much?



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Ezra Klein asks a fair question here:

Where does the Laffer curve bend?

Another way of asking the same question: How high can Ezra Klein’s favored politicians raise tax rates?

Short summary of answers: Professional tax economists guess 60-70 percent, lefties guess around 70 percent, conservative talking heads guess 20-40 percent, elected Republicans won’t say. (Not that you asked, but here’s my answer: Economic conditions are in constant flux, and the tax rates interact with too many other factors — market conditions exogenous to tax policy, interest rates, non-tax public policy, complex investment decisions — for the real growth effects of tax policy to be very well understood. Just a guess.)

Here’s a related question in return: As a share of GDP, what level of government spending produces a net economic loss for the country? Another way of asking this is: How much is enough for Ezra Klein? Progressives don’t like to answer that question — the standard evasive line is that they have no a priori preferences about the size of government — but surely there is a way to get at to the purely empirical part of the question.

Any answers?



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