Some economists are saying that cutting government spending right now will hurt the economy. That’s one of the greatest and most enduring myths in American history: government spending helps stimulate economic growth.

Our friend and world renowned investor, Rob Arnott, and his Research Affiliates colleague, Alex Pickard, have examined stacks of data covering the past 40 years to find out whether John Maynard Keynes was right that government spending helps nations become more prosperous.

They gave us a peak at their forthcoming paper, which finds the opposite in most cases: “real per capita GDP in a nation is negatively associated with government spending.”

They find statistically significant proof that once government spending exceeds 30% of GDP, the citizens get poorer.  We are above 35% in the USA.

The takeaway: We’ve got a lot of cutting to do.