Economic myths: The impact of increasing government spending on economic growth

A sane person can tell the difference between government spending/activities which help the economy; which harm the economy; and which are just transfer payments (welfare, which in turn can either help, harm or be neutral). The avowedly non-partisan economics help gives some examples in each category and attempts to explain why.

As per usual, the lefties want more government spending/bigger government and claim that nonsense like the 'multiplier effect' will help grow the economy; and the right wingers (claim to) want lower government spending/smaller government and claim that this will help the economy.

Neither side distinguishes properly between good, bad and neutral government spending/activity, and both sides put forward their supposedly empirical studies showing whatever it is they want them to show.

What strikes me is that these studies, however scrupulously done, are missing the point - they are confusing cause and effect i.e. countries have generous welfare systems because they are wealthy; countries are not wealthy because they have generous welfare systems. With infrastructure, it is a a feedback thing, the government has to push through roads, sewage systems, national grid to get things kick-started, which then creates more wealth that can be spent on improving them.

So the overall tendency in democratic countries is for government spending to increase as a proportion of GDP when the economy grows. Whether you think this is a good thing or a bad thing is an entirely different topic, but I suppose it's just human nature. Voters want stuff and politicians love bribing them with their own money. The more surplus there is above the subsistence minimum, the more can be collected in tax without triggering a revolution.