Did you know

That if I link my Firefox browser to a Harvard Business Review article then my ten year old, windows 2000 computer reboots? I consider it a service, not a bug.

Why should you care? Because I am definitely not ready for a reboot, and so have not read the Harvard Business Review article discussed in the Hot Air post.

Recent research at Harvard Business School began with the premise that as a state’s congressional delegation grew in stature and power in Washington, D.C., local businesses would benefit from the increased federal spending sure to come their way.

It turned out quite the opposite. In fact, professors Lauren Cohen, Joshua Coval, and Christopher Malloy discovered to their surprise that companies experienced lower sales and retrenched by cutting payroll, R&D, and other expenses. Indeed, in the years that followed a congressman’s ascendancy to the chairmanship of a powerful committee, the average firm in his state cut back capital expenditures by roughly 15 percent, according to their working paper, “Do Powerful Politicians Cause Corporate Downsizing?”

“It was an enormous surprise, at least to us, to learn that the average firm in the chairman’s state did not benefit at all from the unanticipated increase in spending,” Coval reports.

This surprising result does not come from a misapprehension about pork and its relation to the chairmanships of the committees. Indeed, the study shows that pork dollars flow in mighty streams from those chairs to home districts and states. It’s not just earmarks, either, but also legislative expenditures that increase:

The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three congressional committees. In the House, the average is around 20 percent.

For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.

And yet:

In the year that follows a congressman’s ascendancy, the average firm in his state cuts back capital expenditures by roughly 15 percent.

There is some evidence that firms scale back their employment and experience a decline in sales growth.

The point being that government above its equilibrium size has a multiplier lower than 1.0, all the time, every time. When that government take a bigger chunk of local economy growth slows.