A reader writes to say that the Heritage Foundation charts in the first post graphically overstate the actual growth of the federal government over time. “I have a problem with the Heritage Foundation. They have an axe to grind and they show by never showing a jey chart which is compares nominal federal spending to nominal GDP. I didn’t have time to search much, but I found this: http://www.truthandpolitics.org/outlays-per-gdp.php As you can see, the line is kind of flat though rising slightly. It looks much less scary than the charts of the heritage. In a growing economy, Federal spending is going to trend up and to the right. The Heritage people just want it to stop and go down.”
The information is sourced from this OMB document and the relevant paragraph says:
“During the 1930s, total Federal receipts averaged about 5% of GDP. World War II brought a dramatic increase in receipts, with the Federal receipts share of GDP peaking at 20.9% in 1944. The share declined somewhat after the war and has remained between 16% – 20% of GDP during most of this time. In recent years, receipts have increased as a share of GDP — from 17.5% in 1992 to 20.9% in 2000, dropping back to 16.5% in 2003. There have been some significant shifts during the post-war period in the underlying sources or composition of receipts.”
And here’s the supporting table.
| Year | Outlays as percent |
| of GDP | |
| 9.8 | |
| 1941 | 12 |
| 1942 | 24.3 |
| 1943 | 43.6 |
| 1944 | 43.6 |
| 1945 | 41.9 |
| 1946 | 24.8 |
| 1947 | 14.8 |
| 1948 | 11.6 |
| 1949 | 14.3 |
| 1950 | 15.6 |
| 1951 | 14.2 |
| 1952 | 19.4 |
| 1953 | 20.4 |
| 1954 | 18.8 |
| 1955 | 17.3 |
| 1956 | 16.5 |
| 1957 | 17 |
| 1958 | 17.9 |
| 1959 | 18.8 |
| 1960 | 17.8 |
| 1961 | 18.4 |
| 1962 | 18.8 |
| 1963 | 18.6 |
| 1964 | 18.5 |
| 1965 | 17.2 |
| 1966 | 17.8 |
| 1967 | 19.4 |
| 1968 | 20.5 |
| 1969 | 19.4 |
| 1970 | 19.3 |
| 1971 | 19.5 |
| 1972 | 19.6 |
| 1973 | 18.7 |
| 1974 | 18.7 |
| 1975 | 21.3 |
| 1976 | 21.4 |
| 1977 | 20.7 |
| 1978 | 20.7 |
| 1979 | 20.1 |
| 1980 | 21.7 |
| 1981 | 22.2 |
| 1982 | 23.1 |
| 1983 | 23.5 |
| 1984 | 22.1 |
| 1985 | 22.8 |
| 1986 | 22.5 |
| 1987 | 21.6 |
| 1988 | 21.2 |
| 1989 | 21.2 |
| 1990 | 21.8 |
| 1991 | 22.3 |
| 1992 | 22.1 |
| 1993 | 21.4 |
| 1994 | 21 |
| 1995 | 20.7 |
| 1996 | 20.3 |
| 1997 | 19.6 |
| 1998 | 19.2 |
| 1999 | 18.6 |
| 2000 | 18.4 |
| 2001 | 18.6 |
| 2002 | 19.4 |
| 2003 | 19.9 |
The reader continues: “The US Budget deficit reached almost much higher levels during WW2. Plus, as we have learned in the current financial crisis and from Taleb, predicting the future is just a fools game so the whole premise of this chart is absurd. It assumes everything stays the same, no has agency to change anything or react, no market reaction occurs, etc, etc…”
So what is the point? That receipts go down when taxe go up? Looking at receipts and GDP are flawed to begin with. Overlay this chart with total economy wide debt (and add liabiltiies from programs like SS and Medi if you really want a pick me up). That data is on the fed website in the flow of funds report levels table. The number is 50 Trillion and exlcudes about 5 trillion of interagency debt (of total $10T US gov’t debt). It also exlcudes the Agency debt guarantees and that is not an accident. The point: the US needs incrmeentally more debt to generate a dollar of GDP. I can spend an infinate amount of money so long as I can continue to borrow. This whole analysis is like valuing a compny on revenue growth (which fueled the last boom in tech).
GDP is grossly distored by the debt load in this country. With the consumer representing 70% of GDP, you can pick you haircut as you consider the level of debt that is sustainable in the system. it is safe tio say it is well below this level. So those ratios are only good as the statistics and the formulation of the numerator and the denominator. optimcally the fed will try and retard the declines in GDP with printing and manipulation of the deflator, but the when you use a commen sense approach, the ratios of expenditures to GDP is massivily understated. Then again deflation being what it is perhaps the numerator falls proportionately.
GDP is a farcical indicator. Lies more lies and statistics.
The Republicans should have been making a clear political issue about the proportion of the Federal Government to the US economy.
I’m not smart enough to say whether it should be GNP or GDP or whatever, but such macro issues are what the Republican Party should be educating the public about. Instead, McCain was talking in terms of earmarks and planetarium “overhead projectors”, which are trivial issues.
Once the public begins to internalize such proportions, then it can began also to internalize concepts like federalism. If the Federal Government gets only X% of our economy, then some proposed projects must be pushed down to state and local governments — or left to the private sector.
For some reason, a year ago I was looking forward to this election being an educational experience for the public. Boy, was I wrong about that.
GDP is a farcical indicator. Lies more lies and statistics. – S
Then the case is made. If there exists no set of metrics or no baseline to measure economic performance and trends, then the regulatory system is out of control.
I have thought this for some time.
as we have learned in the current financial crisis and from Taleb, predicting the future is just a fools game
I read Taleb’s Black Swan but put it down when I realized he had found a hammer and everything became a nail.
The human being is a creature in time and space and has been equipped with reason and has the ability to obtain wisdom: through such he is able to make reasonable or proverbial statement about the future. Being self-deceived or being given over to a depraved mind will render reason and wisdom meaningless.
Soon to be replaced by “O”banomics, whatever that turns out to be.
The mean over the entire period is a little under 21%. So why don’t we just set a flat tax rate of 20% and allow GDP to grow? Couple it with a redistributive demogrant if that’s your pleasure.
In 1993 a group of U.S. Senators did a study that showed that for every dollar collected in taxes Federal tax laws added another 40 cents of cost borne by private industry. And that is just for the tax regulations.
So, aside from the actual tax revenues there is are the very substantial costs of Federal regulation – and that always goes up. It never comes down. “Deregulation” of any kind is a myth. In the famous cases of the airline and banking industries of the 80;’s there was no real “deregulation” of the industries but merely a relaxation of certain limitations on how they could do business. In doing that business they had to comply with the same regulations as before – and those increase in complexity nearly every year.
You can bet that the Federal Govt that spent 19% of the GDP in 1952 had far less impact on the private sector than the one that spent 19% in 2003.
The only real trend is that federal spending goes up during war. But, that is to be expected. The only war that has been efficient has been the current one.
I will repeat my previous findings. From 1920 to 2008 the democrats controlled at least two of the three branches of the federal government about 60% of the time (and all three branches for long stretches of time). For example to say that President GWB controls the “government” at this point in time is in accurate. He is a nice scapegoat but he really doesn’t control the federal government.
Another example: “Arnold Schwarzenegger controls California which has 55 electoral votes.”
This is obviously inaccurate. Look at the way the state of CA voted. The democrats control both houses and key positions. Arnold Schwarzenegger doesn’t control California.
If you are trying to find the party who actually spends the people’s money simple charts are not the answer.
Why should Federal mandates grow at all?
It seems to me that more and more the Federal government can just ‘mandate’ citizens to do things. Without compensation.
I don’t see why we need taxes at all. We can go to a tax-less, costless ‘mandate’ system. Not that increased ‘mandates, requirements, legalism’ will show up on a graft of burdens imposed on the citizenry.
To paraphrase Phil Gramm, the American people need to stop whining.
McCain lost this campaign. Not Palin.
Well, it was pretty impressive what Federal expenditures could produce at the end of the Depression aka WWII – unending streams of B-17′s and B-29′s and destroyers and carriers.
But that kind of expenditure/result is misleading when considering the results we hope for in investing our tax dollars now. During the recent ever-higher points of the charts we are discussing, many federal expenditures aren’t producing any good things at all. A lot is just gushing money into inertia, like spraying flower seeds on concrete.
When you take state & local govt expenditures into account, total US govt spending is in the high thirties as a percentage of GDP and has been increasing steadily for years (with spikes for World Wars 1 & 2 and a plateau in recent years):
Chart
And of course these figures only show direct govt spending; they do not show the enormous and increasing indirect costs of regulation and litigation. Nor do they account for the vast and increasing off-budget liabilities for SS, Medicare and other entitlement schemes.
O bomanomics. The process whereby you do not have to pay your mtg. car payment or even gas and food bills. It is all taken care of by the ONE. All you have to do is trade your future and your childrens future and this can all be yours!… Please read small print at bottom of post.
Jim
But Slade, I keep reading well-meaning advisories from Democrats who want the GOP to do better next time.
They are unanimous is saying that we are doomed, totally doomed, if we don’t keep Sarah
confined. Some of these Democrats are even thoughtful enough to remind us that Bobby
would be a drag on getting their approval for our next ticket. Gee, are these guys compassionate, or what?
Yeah. Cut the whining. We took a licking. Now we need to make like Timex and kleep a ticking.
JFSanders, your #13: I am originally from the West Texas oil patch. I can safely say that my home folks will receive no largesse
from the Obamaroids.
To which I say, “Thank God For Small Favors!
That gives them a much better chance of survival.
In the Great Depression, unemployment peaked at 25% everywhere in 1932. In Dec of 1941, after almost 9 years of New Deal, the nationwide average was still 14%. However, that latter figure was misleading. Those areas especially favored by the New Deal were still at 20% if not a bit more. Those, like us, that had been left to our own devices had not more than 6% to 8%, even factoring in underemployment.
Point is that the majority of government spending is counterproductive. Physically, we can do without it. It is the psychological dependency that threatens us.
Dave RE the whining.
This is a marginal point, maybe even naive, but I draw a distinction between the elephant and his droppings, the elephant being the “what your country can do for you mentality” and all the attendant bad things that derive from the growing sense of entitlement versus the (naive) idea that government can run efficiently and/or with a lower level of corruption, which I consider an unlikely trend reversal in the global arena.
Just look at the recent economic “bitch-slap”. It started with the Democratic-inspired sense of entitlement, but even that could have been contained if (1) Congress had performed responsibly (responding to multiple warnings, regulatory agencies screaming louder, etc,) and (2) the financial services industry had self-regulated instead of ramping up leverage.
It is one thing to expect “stuff” from the government and another thing to expect that government function. Or maybe not. The “what” versus “how” distinction may be hand in glove as the Libertarians think.
Whatever the case. My “whine” is directed at (1) and (2) above. The “plumbing problems” can be fixed, I think. The problem that never ends is that the entitlement set will forever seek work-arounds. To that end Gramm was right, but the Timing, oh the Timing.
What the American people seemed poised to (re)discover is that paternalism works both ways – entitlement and “what you can do for your country” (not exactly what JFK meant but I guarantee you donuts to droppings the taxes will be draped, not just in the psychology of selflessness, but in the flag.)
In fact Jonathan’s point above re the omission of regulatory costs reminded me of the turning point in my thinking. You never see this in the “charts” (not to mention the failure to explain the “off-budget” accounting status of SS/MM, which must be redefined as aid to the elderly and not an entitlement, as a previous poster suggested.)
I don’t see that “nominal government” can work, or even limited government, not without starting completely over. I am not even sure I think it should, but that’s another issue. I DO think that what we have can be made better – MUCH better by (1) cleaning out Congress** and (2) fixing the mechanics of the financial and banking system.
**Another poster made the excellent point that states are not run by governors but by the state legislatures, California being just the largest example. That legislature has been not just Democratic but hard left Democratic for god knows how long. The same is true for Congress, times some multiplier. Obama, schmama. His individual legacy is the question du jour, but it will not be made in a vacuum devoid of Congressional influence (not to mention the rest of the planet that has been uncharacteristically quiet for awhile.)
I could go on with the list of regulations that have improved the quality and the length of life for Americans (Cedarford has already done that and I agree). But It IS out of control and we’re left with the unpleasant task of separating chaff from the wheat, finding the babies in the bathwater, etc. Messy.
That part I understand. But this Palin trashing I just don’t get.
Some of these Democrats are even thoughtful enough to remind us that Bobby would be a drag on getting their approval for our next ticket.
Well that’s an early morning wake-up. I’m trying to wrap my mind around an “advisory”. I take it these are informal e-mails from your buds in the business. I’m starting to wake up. Does all this explain the Palin trashing? What next? Jindal has a shoe fetish?
@slade: re: Sara Palin trashing: “My existence is grotesque and incomprehensible to you. . .” http://www.youtube.com/watch?v=8hGvQtumNAY
Don’t think for one minute that the Repug leadership class is not drawn from the same bunch of Ivy League nincompoops as the demo’s. They are every bit and more threatened by Palin’s pioneer spirit. This is where we want to go. I for one want them to leave. They are the ones along with W. who could not give us a balanced budget for the four years they had the administration and both houses of Congress.
So the Palins and Jindals emerging from the hinterlands has a “house of cards faltering” feel for the professional political class.
Well, I never!
Jeeves, my fainting towel.
I say hurry my man.
Rahm Emanuel Was on Freddie Mac Board When They Cooked the Books
I had a “but we …” Cedarford moment and left off the punchline:
Well, I never!
Jeeves, my fainting towel.
I say hurry my man.
The Americans are at the Gates.
I agree the GOP should have went more for the specifics that brought the left-wing illuminati supporters in, money. If they would have went into more depth of their spending habits, the outcome would have been better.