"Is the current level of federal government spending good economic policy?”

There is no way to answer this question objectively.  Different people will have different answers. Moreover, there is no way to prove that the current level of government spending is good or bad economic policy. Here are two important factors to think about when trying to decide whether our current levels of spending are good.

First, we have to think about whether our current levels of spending are too high. The US government, of course,...

There is no way to answer this question objectively.  Different people will have different answers. Moreover, there is no way to prove that the current level of government spending is good or bad economic policy. Here are two important factors to think about when trying to decide whether our current levels of spending are good.

First, we have to think about whether our current levels of spending are too high. The US government, of course, runs a rather high deficit every year.  As of right now, our deficit is about 2.5% of GDP.  These deficits have accumulated to create a rather large debt on which the US must pay interest.  Some people would argue that these deficits and this debt are bad for the US because they create a “crowding out” effect.  That is, the government borrows so much money that there is not enough for people and businesses to borrow, making it harder for our economy to grow. If you believe this, you might conclude that our government spending is too high.

The second issue is whether our money is being spent wisely. It is not necessarily bad to have deficit spending or debt.  However, it is important that the government spend on things that will be useful in the long run.  People typically say, for instance, that government spending on roads and bridges and such is good because it creates infrastructure that allows our economy to grow. This makes such spending a good investment. On the other hand, if the government is spending on things that will not help our economy grow in the future, we could argue that our government is spending on the wrong things. If the government is spending on the wrong things, we can conclude that current levels of government spending are not good economic policy.