In other words, government spending directly supplants private sector investment – substituting expensive, cumbersome bureaucracies where efficient, profit-driven companies would have otherwise operated. Needless to say, this “crowding out” of the private sector not only costs jobs – it also comes at a tremendous up-front cost to the taxpayers.
Unlike other studies into the effects of government spending on private sector activity, this research’s focus on committee chairmanships provides a unique “exogenous” (or independent) variable.
“We show that becoming a powerful committee chair results in a significant increase in federal funds flowing to the ascending chairman’s state,” the report reveals. “Thus, a congressman’s ascension to a powerful committee chair creates a positive shock to his or her state’s share of federal funds that is virtually independent of the state’s economic conditions.”
That critical consideration has been routinely ignored by numerous prior studies – most of which have returned “inconclusive” findings regarding the extent to which government growth has been cannibalizing the free market.
These results could not have come at a more opportune time for limited government champions.
Across America, hundreds of incumbent politicians are currently facing the fight of their political lives. In years past, these incumbents would have no doubt relied on their seniority and their ability to secure government funding for their districts as central planks of their reelection platform. Fortunately, the scales are falling from the public’s eyes regarding these so-called “economic development” expenses.
In fact, a recent Rasmussen Reports poll found that only 18 percent of voters believe additional government spending will improve the economy. Conversely, two out of three American voters believe that cutting taxes is the best way to stimulate economic growth.
Voters clearly no longer want politicians who promise to “create jobs,” they want politicians who promise to get out of the private sector’s way.