Last week, I explained that “supply siders” need to be ardent advocates of spending restraint. After all, there is no chance of good tax policy in the future if the burden of federal spending continues to expand.

I also wrote about “national conservatives” and pointed out that their opposition to entitlement reform means they implicitly embrace massive tax increases.

The bottom line is that the United States has a built-in spending crisis. Democrats are not serious about addressing the problem. So if Republicans bail as well, the nation is doomed to become a decrepit, European-style welfare state.

What does that mean? Nothing good, at least for people in the productive sector of the economy.

• Lower living standards and less growth
• Big tax burdens on lower-income people

In an article for National Review, Philip Klein speculates whether there is any appetite for spending restraint, even among self-described conservatives.

For much of the history of the American conservative movement, limiting the size and scope of government has stood as one of its central goals. …In 2022, such messages were barely anywhere to be found on the campaign trail…conservatives have largely moved on from making the case for reducing the size and power of Washington. In some cases, this shift has been passive. …It has become popular in some circles on the right to mock “zombie Reaganism” and insist that while it may have made sense back in the 1980s to argue for smaller government, such a message is now outdated. …the argument that the battle to limit government has already been lost also neglects to recognize that things could always get worse. That is, even though the federal government has gone through extraordinary growth since the New Deal, it would have grown even larger had there been no conservative movement to push back. One need only look at Europe, where conservative parties long ago made their peace with the welfare state, to see how government agencies have crowded out civil society… There is no way in which a nation with…a ballooning welfare state will be an accommodating place for conservatives in the long run, no matter how much some may fantasize about seizing the dragon and precisely aiming its fire at their enemies during the relatively brief windows in which Republicans have power. Conservatives…should not abandon the fight for limited government.

At the risk of understatement, I fully agree.

I wrote two days ago and also the previous week to make the case for spending restraint.

Those are easy columns to write since it is the same argument I’ve been making my entire life. But what is depressing now is that there is opposition from Republicans as well as Democrats.

Maybe they should all be forced to watch my video series on the economics of government spending.

I explained last week that excessive government spending is responsible for about 97 percent of America’s fiscal deterioration in the 21st century.

I followed that column with two post-election pieces that explained how huge tax increases will be inevitable if there is no effort to deal with the spending problem.

Simply stated, lawmakers need to copy the fiscal restraint of the Reagan years and Clinton years.

Why? To help people enjoy better lives thanks to faster growth and more opportunity.

In the Wall Street Journal, Andy Kessler explains that smaller government is the recipe for more growth.

Winston Churchill…said: “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucketand trying to lift himself up by the handle.” The U.S. should heed that advice… economic growth is going to come from efficient supply chains and productivity in manufacturing in the U.S. Tax andspending cuts are the cure. …Republicans must resist the urge to subsidize higher energy costs and instead help slay inflation and bring back a strong, productive economy.

Let’s look at some new academic research bolstering Kessler’s argument.

Megha Jain Aishwarya Nagpal, and Abhay Jain published a study last year in the South Asia Journal of Macroeconomics and Public Finance.

The key findings deal with the Armey-Rahn Curveand can be found in the abstract.

The current study attempts to examine the linkage between government (public) spending and economic growth in the broader framework of selected South Asian Nations (SANs), BRICS and other emerging nations by using two sets of empirical modelling over the period 2007–2016 by using inverted U-shaped hypothesis, propounded by Armey curve (1995).…The key findings signify the existence of an inverted U-shaped relationship for the selected data set of emerging nations and, therefore, support the Armey curve hypothesis. The projected threshold (tipping) levels (as a percentage of GDP) are 24.31% for the government total expenditures (GTotExp), 12.92% for consumption spending (GConExp) and 7.11% for investment spending (GInvExp). It has been observed that a rise in the public spending (size) resulted in a substantial…decrease…in the growth rate when the public spending was…after…the optimal threshold level, indicating a non-monotonic association.

For what it’s worth, I think the study is wrong and that the growth-maximizing level of government spending is much lower than 24.3 percent of economic output.

But since total government spending in the United States now consumes about 40 percent of GDP, at least we can all agree that there will be more prosperity if America’s fiscal burden is dramatically reduced.

If we ever bring the spending burden back down to 24.3 percent of economic output, we can then figure out whether the ultimate goal is even lower (as it was for much of America’s history).

There is one point from the study that merits further attention. The authors estimated not only the growth-maximizing level of total spending, but also how much the government should spend on “consumption” and “investment” outlays (an issue I addressed last month).

Here’s a chart from the study showing that consumption outlays should be less than 13 percent of economic output.

P.S. If you want to watch videos that address the growth-maximizing size of government, click here, here, here, here, and here.

P.P.S. Ironically, the case for smaller government is bolstered by research from normally left-leaning international bureaucracies such as the OECD, World Bank, ECB, and IMF.