Federal Spending and Economic Freedom
Why Less is More
The less the government spends, the more the government itself shrinks relative to the economy – and the greater the economic freedom for stock investors.
More economic freedom means much more economic surplus and capital created, as resources are allocated much more efficiently.
I have hypothesized that the stock market rally has been caused by investors anticipating more economic freedom….take a look at the amazing shrinking government.
Federal spending in calendar year 2013 was only slightly above its post-War average of 19.1% of GDP, by my calculations. Federal revenues were only slightly below their post-War average of 17.2% of GDP. Nobody on earth expected this to happen back in mid-2009. This achievement was brought about largely by a combination of a) no growth in spending and b) the recovery, which boosted the tax base.
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