GOP Report Finds Reducing Gov't Grows Economy

By Mario Trujillo

Rep. Kevin Brady (R-Texas) unveiled a report Tuesday compiled by members of the Joint Economic Committee that found that cutting spending would improve, not harm, the nation’s fragile economy.

Brady, the committee’s vice chair, said that President Obama’s Recovery Act had not adequately improved the economy or brought down the unemployment rate. 

“The White House promised our unemployment rate would be down to 6.9 percent by now,” Brady said at a press conference with other House Republicans. “The ‘government spending is the answer’ crowd had their chance to jump-start the economy. They failed. It is time for a proven approach.”

Brady said reducing the size of government and thus lowering the tax rate would give businesses the incentive to invest and would give Americans more disposable income to spend. Reducing transfer payments, government jobs, compensation and agencies is needed to make large and credible cuts, Brady said. 

As a way to reduce deficits, the report cites a successful balance that 85 percent of debt reduction come from spending cuts while the other 15 come from revenue increases. The report cites an unsuccessful ratio as nearly 50/50.

The report cites Canada, Sweden and New Zealand as counties that experienced economic growth as a result of reducing the size of their governments. All three countries also started out with larger government spending as a percentage of GDP than that of the U.S.

For example, the report cites a period from 1991-1999 in New Zealand where the economy grew while government spending dropped from around 40 percent of GDP to 30 percent. The projected outlays for the U.S. in 2011 is 24.7 percent of GDP.

“If you look at [other countries], they are different,” Brady said. “It didn’t work in all cases, what the economists identified was the winning formula.”