A good short post from Dan Mitchell:
I’ve repeatedly explained that Keynesian economics doesn’t work because any money the government spends must first be diverted from the productive sector of the economy, which means either higher taxes or more red ink.
So unless one actually thinks that politicians spend money with high levels of effectiveness and efficiency, this certainly suggests that growth will be stronger when the burden of government spending is modest (and if spending is concentrated on “public goods,” which do have a positive “rate of return” for the economy).
I’ve also complained (to the point of being a nuisance!) that there are too many government bureaucrats and they cost too much.
But I never would have thought that there were people at the IMF who would be publicly willing to express the same beliefs. Yet that’s exactly what two economist found in a new study.