Thursday, October 21, 2010

Reasons why big government hurts economic growth

This week Bank of Canada Governor Mark Carney backtracked on his outlook for the Canadian economy. Things aren't as rosy as he once thought from his lofty perch in Ottawa. Down here in the real world lots of people have large debt, governments around the world claim to be cutting their size and spending because of debt, debt seems to be in abundance. So it makes sense that people and governments will rein in their spending and slow economic growth. That sounds right on paper but is that really the cause of poor economic growth?

Here is a view from Dan Mitchell at CATO that was produced over a year ago. It focusses on the American situation, but each of the reasons listed applies just as much (maybe more) to Canada.

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