Bigger government leads to slower growth
From John Mauldin:
We talked earlier about how increasing government debt crowds out the necessary savings for private investment, which is the real factor in increasing productivity. But there is another part of that equation, and that is the percentage of government spending in relationship to the overall economy. Let's look at some recent analysis by Charles Gave of GaveKal Research.
It seems that bigger government leads to slower growth. The chart below is for France, but the general principle holds across countries. It shows the ratio of the private sector to the public sector and relates it to growth. The correlation is high.