Columbia International Affairs Online: Policy Briefs

CIAO DATE: 04/2009

Did Reagan Rule In Vain? A Closer Look at True Expenditure Levels in the United States and Europe

Jacob Funk Kirkegaard

January 2009

Peterson Institute for International Economics

Abstract

It is generally believed that the United States is a country of low taxes and small government, at least when compared with countries in Europe (and until the financial crisis so greatly expandedthe role of the federal government in the United States in late 2008). Fully accounting for the role, size, and effect of the government in an economy is a complex endeavor, however, and it is hardly accomplished by repeatedly restating differences in top marginal tax rates, overall tax burdens, or gross sizes of governments in GDP terms.