"It explains the “Rahn Curve,” which is a spending version of the Laffer Curve. Named after Cato Institute’s Richard Rahn, the Curve shows that modest amounts of government spending – for core “public goods” such as rule of law and protection of property rights – is associated with better economic performance.
But when government rises above that level (as it has in all developed nations), then more government is associated with slower growth."
The optimal level of gov't spending seems to be between 15 and 25% of GDP, but that spending must be focused. Greater amounts of spending are sometimes required to promote economic growth, such as the interstate highway system, railroad subsidies of the 19th century, the Panama Canal, etc. These were projects which were, at the time, too great for any private enterprise to undertake, but the economic benefit was great.
Giveaways and social programs are non-productive and stunt economic activity.
