As the size and scope of federal spending expands under the Obama administration, the debate over the country’s fiscal future has intensified. In their book, Government Size and Implications for Economic Growth (AEI Press, May 2010), Swedish economists Magnus Henrekson and Andreas Bergh find a negative correlation between the size of government and the rate of economic growth in rich countries. How significant is the tradeoff between government services and economic growth? How should we explain the recent experience of Scandinavian countries, where high tax rates and large government sectors have been coupled with high rates of economic growth?

At this event, the authors argued that long-term economic development is affected not only by the size of government, but also by what governments do and how that activity is financed. Henrekson and Bergh were joined by Donald Marron, director-designate of the Urban-Brookings Tax Policy Center to discuss the implications of their findings for U.S. policy. Henry Olsen, vice president of AEI’s National Research Initiative, moderated.