Dan Mitchell on the prospect of smaller government

Prompted by the victory of Donald Trump, people are starting to wonder whether his mix of policies can make a difference to the US debt, to regulation and to big government. Dan Mitchell contemplated Wagner’s Law which points to a correlation between the wealth of a nation and the size of its public sector. Lefties love it, but it confuses correlation with causation. Rich nations can afford a deal of waste, as Smith said, there is a power of ruin in a nation.
Even libertarians like Will Wilkinson have given up and decided that people like welfare so much that the richer they get the more they want to state to provide more welfare.
Strictly, it is not so much the size of the bureaucracy that matters, it is how much they interfere with the private sector. So the thing is to focus on reducing the functions of government and especially the burden of regulations.
Mitchell pointed out that if a nation like Denmark gets enough right on the production side, it can carry a lot of lead in the saddlebags on the other side. But for how long?

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8 Responses to Dan Mitchell on the prospect of smaller government

  1. Entropy

    I think it is a matter of not only getting enough right, but keeping on get enough right.

    It is astonishing me how much in my lifetime even professional line agencies in the public service are turning inward looking, no longer expressly service oriented but dominated by HR targets (eg diversity), workplace objectives and procedures, the list that is ever growing as risk management procedures limit functions ever more and more. The professionals who just want to do their job and passively ignore or resist are increasingly regarded as an impediment to these objectives.

    It’s like the public service is becoming a reason to exist because it is.

  2. mareeS

    The only sensible response to big government is to pay no tax. They think your money is theirs, to do with as they wish, and leave a little bit over to you.

    Kerry Packer had it right on the Australian government, you are not spending it well enough that I want to give you any more.

  3. old bloke

    Strictly, it is not so much the size of the bureaucracy that matters, it is how much they interfere with the private sector.

    Size does matter Rafe. It is the nature of bureaucracies to meddle, to do “things” to justify their existence. The best approach to reducing the size of the bureaucracy is the ALA’s approach, sharply reduce the size of the ministry which results in fewer government departments, therefore a smaller, more focussed bureaucracy.

    Reducing the bureaucracy reduces government expenditure, but the changes have to begin at the top.

  4. struth

    Rich nations can afford a deal of waste, as Smith said,

    Not with my taxes.
    There is something called right and wrong.
    It is wrong to force people to pay you money and then waste it.
    I want every cent I pay doing good.
    This whole “rich nations can afford” is a load of rubbish, as they only grew rich under smaller government and less regulation.
    That was a moment in history that carried a couple of generations after it.
    Now those nation’s governments are in debt.
    A nation can never, never afford waste, BESIDES it being a slap in the face to those serfs forced to work to pay for it.

  5. Snoopy

    Entropy, equally astonishing is that the drones honestly believe they are doing something worthy and important and that they must, simply must, continue to be employed to do it.

    The angst and rage when Newman made modest cuts was hilarious to behold.

  6. Boambee John

    Snoopy and Entropy,

    There is also an element of honesty involved.

    There are people who feel that, having a job in the PS, they should do something to justify their remuneration.

    Unfortunately, their efforts are often counter productive.

    Find them a job that adds value, then let them at it.

  7. Michael Cunningham aka Faustino aka Genghis Cunn

    “Wagner’s Law which points to a correlation between the wealth of a nation and the size of its public sector.” Some years ago, I read a wide range of economic literature, using a variety of techniques, all of which found that economic growth was optimised when the government’s share of GDP was 22%. [Don’t have the sources now.] No doubt wealthier countries have larger public sectors, but having worked as an economic adviser to the UK, Oz and Qld governments, I know how sub-optimal that is, not just economically but in terms of the negative impact on society and it’s values. I’m a 22-percenter.

  8. Tator

    a bloke by the name of Van Heerdon from Pretoria University worked out that the optimal level of taxation as a percentage of GDP for South Africa is only 18.5% to ensure optimal growth. Now that is a figure that most Cats would approve of as you could probably kill off all the nuisance taxes and keep a lowish flat income tax of around 20% rate with a generous tax free threshold along with the current GST.
    The biggest problem are those muppets who generate policy creep within government. Drain that swamp!!!!!

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