How Government Spending Harms Private Investment

Damon Root at Reason Magazine references Independent Institute economist Robert Higgs, who argues that government spending and economic intervention harms development of the private sector economy. Higgs presents a solid case against government interference in the economy and Keynesian economics in general.

[W]hile private investment is the engine of economic growth, government spending (despite what generations of Keynesian economists have asserted) is the brake. To understand this negative relationship, we need only scrutinize how the federal government’s spending is determined: namely, by political processes devoid of economic rationality.

In this light, we can appreciate that enhanced government spending does not bulk up the economy, nor merely crowd out worthwhile private activity. Instead, it undercuts, penalizes and distorts everything that private parties attempt to do to create wealth. Ham-fisted government regulations and additional taxes are known killers of economic growth.

Read the whole thing here.

Root is also kind enough to include a Reason.tv interview with Higgs, in which he discusses the decline of classical liberalism (i.e. libertarianism) in America.

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