Belmont Club

More vs less, guns vs butter part 2

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…”