President Obama plans $55 billion in new government spending and higher taxes on some Americans for fiscal 2015, but most voters continue to believe that more spending and higher taxes hurt rather than help the economy. Cutting taxes, they say, is the better way to create new jobs.
A new Rasmussen Reports national telephone survey finds that just 23% of Likely U.S. Voters think more government spending and higher taxes will help the economy. Sixty percent (60%) believe that combination will hurt the economy instead. Only eight percent (8%) say they will have no impact.
Here in North Carolina, we are fortunate that the fiscally conservative majority in the legislature passed a tax reform AND tax reduction plan.
In addition, we are also fortunate that JLF’s John Hood has done an exhaustive survey of the academic literature on which polices lead to state economic growth and which do not.
From 1992 to 2013, there were 31 studies of economic freedom indexes. In 24 of them (77 percent), higher economic-freedom scores were associated with higher economic performance after adjusting for other factors. In the remaining seven studies, there was no statistically significant relationship. Not a single study found that higher economic freedom — which primarily means lower taxes, spending, and regulatory burdens — was statistically associated with lower economic growth.
A 2012 paper in the International Journal of Economics and Finance, for example, found that states with higher economic freedom tend to attract higher levels of investment from foreign firms, which then leads to more economic growth. A 2007 study in the Southern Economic Journalfound that states attract another form of valuable capital, people, to the extent they embrace economic freedom.
And a 2013 paper in Contemporary Economic Policy found that higher state rankings on the Fraser Institute’s Economic Freedom of North America index was associated with lower unemployment and higher labor-force participation. “Our findings have clear implications for policymakers,” the study’s authors concluded. “Adopting policies that increase economic freedom by one point in the EFNA index would reduce the unemployment rate by as much as 1.3 percentage points” while increasing “the labor force participation rate by up to 1.9 percentage points and the employment-population ratio by as much as 2.3 percentage points.”
