Not so fast
“Kash” of the Angry Bear carries a post detailing federal spending over time as a percentage of the economy. He concludes:
No, the only category where it seems clear that Bush has deliberately let the money flow freely is in defense.
The usually sharp and libertarian Asymmetrical Information endorses the conclusion, calling it an “excellent” post. But Kash’s analysis is short-sighted. It fails to account for the fact that Bush’s massive $400 billion increase in Medicare spending has yet to take place; it phases into place over the next 10 years. The devastating effects of Republican spending will be like the slow impaling of a dagger, not a swift jab that we can see in a real time graph.
Finally, Angry Bear appears to assume that because something costs X% of the economy to function properly, it must always cost X%. Why must that always be the case? With efficiencies and economies of scale, some government costs should actually decline as a percentage, not necessarily stay the same.
Either way, looking at government spending as a percentage of the GDP in the status quo tells us very little about the long term budget decisions of a government.
3 Responses to “Not so fast”
I think you’re underestimating how useful looking at how the government changes as percentage of GDP can be, simply because that’s a good way of taking inflation into account.
If the lines on his graph all stayed steady, that would mean that the particular part of the government was growing, but it was growing at a controlled rate. Under Bush, the only one seemingly declining is the “Social Security” one, while under clinton, all of them seemed to decline or hold steady for the last 4 years. Therefore, in all of those cases, Bush is helping grow government at a far faster rate than inflation.
Furthermore, I think that something like this metric is also useful for looking at taxes…at the same time as we’ve watched spending in almost every category go up relative to the GDP, we’ve watched government revenues decline relative to the GDP due in part to the tax cuts. The divergence of these 2 metrics is what has produced the deficit.
I didn’t intend to discount the use of looking at spending as a percentage of GDP. I’m just saying that it’s not the end-all to indicators. It’s still good, and perhaps the best, but it isn’t the complete picture.
Most important, though, his graph doesn’t account for massive future spending.
Asymmetrical Information notes the problem with the expenses of the P & I Welfare program not having kicked in yet.