Big Government damages the economy, reduces wages, and more

Without being overly dramatic, it is a fair statement that the presence of government is, in itself, induces economic distortions into the economy. This is true for at least two reason:

1. Taxes, collected in any form to support government operations, change the basis of economic calculation and take resources (e.g., capital, manpower) out of the private economy
   
2. Government regulations take further resources from the private economy, by forcing businesses to employ capital and manpower in efforts to comply with these regulations

The larger government grows, the taxes it takes to support it and the more regulations it promulgates, the greater the economic distortions. However, the effect of government growth (as a percent of GDP) is not linear. Instead, as government grows beyond a certain point, the curve turns upward exponentially.

Texas A&M University’s Edgar Browning, writing in Stealing From Each Other (2008), concludes that out own excessive government reduces average incomes in the U.S. by about 25 percent. The more the U.S. politicians insist on growing spending, the more average American incomes will be squeezed downward.

Mind you, the squeezing will occur only against the middle class. The extremely wealthy—especially those connected with international banking and capital brokerages (Wall Street)—are affected by this squeeze. Similarly, those at the bottom of the economy are not greatly affected. They are sheltered mostly because they are being propped up through (damaging) government entitlements and supports (e.g., welfare, minimum wage mandates).

There’s more damage

As government grows, the more it creates a top-down bureaucracy that was formerly alien to our American tradition of individual liberty. The growth in federal power and over-regulation tends to destroy both diversity and innovation in state and local governments by seeking to impose nationwide uniformity through its rules. Federal aid to states is always accompanied by reams of regulations that reduce freedom and operating choices.

In short—whether we run trillion-dollar deficits or not—cutting federal spending is beneficial because the cuts automatically contribute to the dispersion of power (back to the states) and the expansion of liberty.