Tuesday, July 5, 2011

Take Five for Budget Sanity

This post for those who suspect that our representatives are losing their marbles in the latest fight over the U.S. debt ceiling. In that context I got to wondering: Just how big is government as measured against the Gross Domestic Product? The answer turns out to be that it was 20.5 percent in 2010, thus in round numbers, a fifth of all economic activity. But how much has it grown? It must have grown fantastically when you listen to our representatives. Must it not? Well, folks, in the last sixty-two years government, as a percent of GDP, has grown a whole, monstrous four-tenth of one percent. In 1951, government was 20.1 percent of GDP. Now lets look at that—and then some detail beneath it.


What this chart shows, courtesy of Table 1.1.5. of the Bureau of Economic Analysis, the keeper of these number, that the small increase in total government expenditures as percent of GDP came from state and local government. It went from 6.8 percent of GDP in 1951 to 12.2 percent in 2010, an increase of 5.4 percent in this period. At the same time, federal government declined from 13.3 to 8.3 percent of GDP, a loss of share of 5 percent. The difference between these sectors, that 0.4 percent, is the only increase. Just to show it, I’ve also charted a sub-component of the federal, the national defense component. It grew within the federal budget by 1 percent in this period. The overall decline in federal expenditures, therefore, has been due to shrinking expenditures on domestic programs.

I remember the 1950s pretty well. What I don’t remember is the hysteria surrounding budgets then. I conclude that the current madness has nothing to do with job creation, efficiency, or the government growing oppressively huge. Based on these numbers, its basically the same size it was in 1951. Money has shifted to the state and local level, away from the federal, except defense.

What is this clash all about? It is a curious upheaval by a portion of the population against anything that represents collective effort. It takes the form of refusing to pay taxes. This disease first attacked the national government. Now it has spread to attack the state and local—so that we are roused from sleep by headlines telling us of bankrupt Minnesotas.

The people are aroused—but they are also a little confused. The fetid airs of failing capitalism are finally reaching the people—and they mistakenly believe that the evil odors they smell arise from those who’re trying to keep the roads paved, children in school, sewage treated, and food and drugs inspected. It’s not like that, Mr. and Mrs. America. Look at the chart. Lots of things are wrong, but it’s not government going for broke. It’s only going—broke, that is—because we refuse to pay the bills while expecting the services to keep on coming. Think again. Think again.

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