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A Historical Detail About Federal Government Spending

April 5, 2011

An article on today’s Huffington Post by Jon Ward, “Paul Ryan’s Budget Proposal: analysis of the numbers” contains some interesting numbers to help us put things in historical perspective.

One thing he doesn’t mention is that recent expansions in federal spending have been offset by vastly reduced state and local spending so that  total government expenditures (federal, state, & local comibned) have not grown in the last few years. That isn’t mentioned much in the mainstream media, it seems to me.

Current federal spending, according to Ward’s numbers, amount to 25.3% of GDP. That’s the highest since 1945-46 when it peaked at 41%  of GDP because of the cumulative expenses of the 1930s New Deal civilian  “stimulus package” and the much larger World War II military “stimulus package” that finally brought the US economy out of the Great Depression. Go back and read my post on this blog from last October 29: “How Dangerous Is Our Big National Debt?” which refutes the notion that large deficit spending cripples economic growth, as conservatives claim. Far from being a crushing burden on the next generation and leading to economic ruin, the next 25 or 30 years following WWII were the most prosperous in world history. lifting millions  of Americans out of poverty despite expanded government services,  various wars both hot and cold, and increasing expenditures.

At any rate, government spending dropped to 18% of GDP during Truman’s presidency. reached 21% during Reagan’s years in office, dropped back to 18% under Clinton, then rose again to 22.8% under George W. Bush. The conservatives were quite content with that at the time. The Obama Administration’s proposed budget would reduce current levels from 25.3% to 22%.

The GOP proposal unveiled by Paul Ryan aims for 20%.  He and the GOP claim an economic apocalypse will be certain if that restriction is not imposed. It will be the end of the world, they say.

Looked at in  historical context, federal spending increases in recent years don’t seem so gigantic or unexpected, given that we are in the throes of the Great Recession, by far the worst economic disaster since the Great Depression. Most of the increased spending comes from such things as repeated tax cuts for the rich reducing revenues; massive unemployment and underemployment reducing payroll tax revenues;  increased and extended unemployment benefits; unregulated and soaring private health care costs impacting Medicaid and Medicare in a big way.

There’s no mystery there. And the options for change are obvous. Which of the variables do you want to adjust?









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