One Way of Looking at our Spending Binge

Steven Horwitz

While looking at a variety of data on the US economy over the last 35 years, I discovered an interesting way to look at what's happened to the federal budget in the last couple of years.  If you compute non-defense spending as a percentage of GDP, you find that since 1976 it has been remarkably stable, wobbling between 14 and 16.5%, averaging 15.14%.  Until, that is, FY 2009 and 2010, during which the numbers are 19.09% and 19.31% respectively, about a full 4 percentage points higher on average. 

Given the fairly narrow band in which that figure moved for over thirty years, the last two are indeed exceptional. Their exceptional nature is further reflected if one views the deficit/GDP ratio, which has been at or above 10% for those two years, the highest since WWII, and well above the 2.5% average for the 30 years prior.

Make of this what you will.

Comments

[Daniel Kuehn]

Is this non-defense federal spending or all non-defense government spending? I'm sure the basic story stays the same, but I'm guessing you're going to see considerably less of a jump if you're looking at government rather than federal spending.

"Exceptional" is exactly the word for it, I think.

[Daniel Kuehn]

And I should add... the real test is to see if it stays exceptional, or if it become unexceptional.

[Daniel Kuehn]

Sorry for three in a row... Gene Steuerle has another measure that I like a lot that you might be interested in. He calls it the "fiscal democracy index". It is the percentage of federal revenue not allocated for mandatory programs (including interest on the national debt). In other words, it is the amount of revenue that the current Congress is free to allocate itself. That has not been stable for the last several decades - it has steadily declined and it has recently gone negative.

It's the sort of tyranny of the past that Jefferson was worried about when he talked about having a reset-button every 19 years. It's not quite the same as the big government/small government thing you're looking at, but I've always found it to be an interesting measure.

[Steve Horwitz]

That's total federal spending minus defense spending.

[lukas]

Of course, none of the "mandatory" programs are really mandatory. Congress can adjust any of them at will, it has done so in the past (upwards, mostly), and it will have to do it again in the future (downwards).

[Current]

This is quite interesting...

http://trueslant.com/michaelpollaro/2010/05/13/america-piigs-%E2%80%9Cr%E2%80%9D-us-too/

[topills.com review]

That has not been stable for the last several decades - it has steadily declined and it has recently gone negative.