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The term limited government is used in two basic ways
a system of government where the authority of the government over the citizens is restricted by law
a system of government where the government is allowed to have very little authority over its citizens
The United States government was designed to be extremely limited and decentralized. This can be seen by reviewing the U.S. Constitution (see Americanism) that codifies what little power that the citizens allow the federal government to have, how federal power is distributed among 3 branches, and that the majority of governing authority would be retained at the state level in order to prevent the consolidation of power (see central planning).
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