How Much is Government Costing Us?
By David Henderson
A few months ago, in the comments on one of Bryan’s posts (I can’t remember which one), Bob Murphy asserted that real income per capita would rise by a large double-digit percent within a year or two if the size of the government were scaled back by about 90 percent. I told Bob that I doubted it. We started to discuss it off-line and Bob convinced me that it wasn’t as implausible as it sounded. So in my role as Econlib Features Editor, I suggested that he submit an article to Econlib. It appeared yesterday and in it, he makes his case. See what you think.
If he’s right–and I now believe he is–think of the implications. One of the standard objections libertarians get when they advocate scaling back the government is “What about the poor?” Now, granted, the 18 percent increase in real income that he estimates is not uniform. My guess is that many high-income people would benefit by much more than 18 percent because they are now taxed so heavily. But think of the almost 100 percent implicit tax rate (marginal and average) on poor people who are in prison. Many of them would be out because the crimes they’re in for would no longer be crimes. (Think peaceful dealers in illegal drugs or peaceful people who are in the prostitution business.)