While you’re reading things you might want to take a look at this post and its linked paper by Donald Marron. In the paper Mr. Marron suggests that the federal government may actually be somewhat bigger, relative to GDP, than the official numbers might lead you to believe.
There’s one thing in the post I’d take exception to:
Eric and I would be the first to argue that the size of government, by itself, tells you little. Small governments can be dysfunctional, and large ones can be well-run. But government size plays a central role in many political discussions. Given that attention, we think it’s worthwhile to consider whether existing measures fairly capture its true size.
Dysfunction isn’t the only issue at stake in considering the size of government. There’s also deadweight loss and, assuming a deadweight loss of, say, 15%, there’s more than a hundred billion dollars more lost economic activity between a government that comprises 20% of the economy and a government that comprises 25% of the economy.
He does bring up one vital point that is too often ignored:
As I will discuss in a subsequent post, our measure of government size has several important implications. For example, some “tax increases†(e.g., closing loopholes and reducing many other tax preferences) actually make the government smaller.
In other words not every tax cut is good and not every tax increase is bad. Not only does size matter but structure does, too.
You are assuming deadweight loss is invariant to the size of government. The larger the government the larger the revenue stream it will need. This will likely mean that the larger the government, the larger the deadweight loss, so your estimate is probably a bit low.
Still, that is a sizable loss in regards to economic activity, i.e. jobs and income when you get right down too it. The idea that expanding government during a period of economic slow down is probably the exact opposite of what we should be considering. At the very least we should hold the size of government stable.
“Still, that is a sizable loss in regards to economic activity, i.e. jobs and income when you get right down too it. The idea that expanding government during a period of economic slow down is probably the exact opposite of what we should be considering.”
Why? And a definition of deadweight would be helpful, too.