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Louis Johnston, Economics


U.S. state social spending has increased both as a percentage of national GDP and a percentage of the national budget since 1960. Growth in spending across states, however, has not been uniform. Those advocating for more conservative spending argue that large social expenditure budgets dampen the growth of society as a whole. In this paper, I examine the effect that state social spending has on the growth rate of personal income per capita. I follow the model proposed by Peter Lindert (2004), who studied the relationship between social spending and economic growth at the national level. I examine the period from 1990 to 2007 and consider social spending and personal income data for all 50 U.S. states. I find that the level of state social spending has no effect on personal income growth, a conclusion which agrees with Lindert. This result suggests that state governments could invest more money in social programs at no cost to the mean income of its populace. After exploring the relationship between social spending and personal income per capita, I consider whether governments have an obligation to spend money on social programs by reviewing three perspectives: Robert Nozick, John Rawls, and the Catholic Church. Nozick thinks that governments have no obligation to spend money on social programs, even if doing so would benefit society economically. The other two perspectives, however, hold that social spending is obligatory, regardless of how it affects the economic well-being of society. These perspectives show that the decision to redistribute money isn’t solely based on economic outcomes.

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