Tag Archives: bureau of economic analysis

Cato Institute: Government spending is 41% of GDP

Cato Institute: Government spending is 41% of GDP

I love the Cato Institute because they give us the facts that liberals just can’t refute. Instead of trying to raise our taxes, President Obama should be cutting spending.

American Government Spending: 41% of GDP

Posted by Chris Edwards

My good friend Kathy Ruffing at CBPP takes me to task for testifying that government spending in the United States is 41 percent of GDP, which in my view is a very high and harmful level.

Kathy says that recent U.S. spending data is “exaggerated” because of the recession, and indeed, spending has soared not only here, but in most major countries because of the unfortunate popularity of Keynesian pump-priming theories. My point was that the American smaller-government advantage eroded both during the Bush growth years and during the Obama recession years, as seen in Figure 2 of my testimony.  

Kathy noted that the OECD data I used are different than U.S. national income accounts data published by the Bureau of Economic Analysis. Well, that’s right. Every country has quirks in the way they do their national income data. The advantage of using OECD data is that the economists at the OECD adjust for these quirks and create spending data that is comparable across countries. If Kathy has more accurate international comparisons, I’d love to see them.

Finally, Kathy says that just because American government spending divided by GDP is about 40 percent, that “doesn’t mean that government controls about 40 percent of the U.S.economy.” I don’t agree. She means that government does not produce 40 percent of gross domestic product, which is true. The broader figure of 40 or 41 percent includes not just government production but government transfers. And transfers do entail government control over resources because both the taxing and spending activities involved in transfer programs distort private sector behavior. Thus, the government misallocates resources both when it “produces” useless solar power activities in its own labs and when it subsidizes failed private solar companies.   

Anyway, thanks to Kathy for raising the important issue of the overall size of government because it is something that the policy community should focus more attention on. For data geeks, the OECD has all kinds of cross-country comparison data here. Government spending is Table 25.

Federal Spending per Household Is Skyrocketing

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

The federal government is spending more per household than ever before. Since 1965, spending per household has grown by nearly 162 percent, from $11,431 in 1965 to $29,401 in 2010. From 2010 to 2021, it is projected to rise to $35,773, a 22 percent increase.

INFLATION-ADJUSTED DOLLARS (2010)

Download

Federal Spending per Household Is Skyrocketing

Source: U.S. Census Bureau, White House Office of Management and Budget, and Congressional Budget Office.

Chart 1 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

With Govt Spending at 41% of GDP should President Obama try to raise taxes?

Cato Institute: Government spending is 41% of GDP

I love the Cato Institute because they give us the facts that liberals just can’t refute. Instead of trying to raise our taxes, President Obama should be cutting spending.

American Government Spending: 41% of GDP

Posted by Chris Edwards

My good friend Kathy Ruffing at CBPP takes me to task for testifying that government spending in the United States is 41 percent of GDP, which in my view is a very high and harmful level.

Kathy says that recent U.S. spending data is “exaggerated” because of the recession, and indeed, spending has soared not only here, but in most major countries because of the unfortunate popularity of Keynesian pump-priming theories. My point was that the American smaller-government advantage eroded both during the Bush growth years and during the Obama recession years, as seen in Figure 2 of my testimony.  

Kathy noted that the OECD data I used are different than U.S. national income accounts data published by the Bureau of Economic Analysis. Well, that’s right. Every country has quirks in the way they do their national income data. The advantage of using OECD data is that the economists at the OECD adjust for these quirks and create spending data that is comparable across countries. If Kathy has more accurate international comparisons, I’d love to see them.

Finally, Kathy says that just because American government spending divided by GDP is about 40 percent, that “doesn’t mean that government controls about 40 percent of the U.S.economy.” I don’t agree. She means that government does not produce 40 percent of gross domestic product, which is true. The broader figure of 40 or 41 percent includes not just government production but government transfers. And transfers do entail government control over resources because both the taxing and spending activities involved in transfer programs distort private sector behavior. Thus, the government misallocates resources both when it “produces” useless solar power activities in its own labs and when it subsidizes failed private solar companies.   

Anyway, thanks to Kathy for raising the important issue of the overall size of government because it is something that the policy community should focus more attention on. For data geeks, the OECD has all kinds of cross-country comparison data here. Government spending is Table 25.

Federal Spending per Household Is Skyrocketing

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

The federal government is spending more per household than ever before. Since 1965, spending per household has grown by nearly 162 percent, from $11,431 in 1965 to $29,401 in 2010. From 2010 to 2021, it is projected to rise to $35,773, a 22 percent increase.

INFLATION-ADJUSTED DOLLARS (2010)

Download

Federal Spending per Household Is Skyrocketing

Source: U.S. Census Bureau, White House Office of Management and Budget, and Congressional Budget Office.

Chart 1 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Arthur Brooks on Debt Ceiling

I got a lot of useful information out of this article from the Wall Street Wall Street Journal  The Debt Ceiling ‘Skirmish  

 

MONDAY, JULY 25, 2011

The Debt Ceiling ‘Skirmish’

 
 
We couldn’t help but be impressed with a column by Arthur C. Brooks, President of the American Enterprise Institute which is appearing in the Wall Street Journal.   The column, The Debt Ceiling and the Pursuit of Happiness, probably won’t appear in the local daily but it sure spells out the reality of the current fight and what is at stake.   With that said we suggest the following is mandatory reading for our conservative and liberal friends:
_________________________

“The battle over the debt ceiling is only the latest skirmish in what promises to be an ongoing, exhausting war over budget issues. Americans can be forgiven for seeing the whole business as petty, selfish and tiresome. Conservatives in particular are beginning to worry that public patience will wear thin over their insistence that our nation’s government-spending problem must be remedied through spending cuts, not by raising more revenues.

But before they succumb to too much caution, budget reformers need to remember three things. First, this is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism. Second, it is a moral fight, not an economic one. Third, this is not a fight that anyone can win in the 15 months from now to the presidential election. It will take hard work for at least a decade.Consider a few facts. The Bureau of Economic Analysis tells us that total government spending at all levels has risen to 37% of gross domestic product today from 27% in 1960—and is set to reach 50% by 2038.

The Tax Foundation reports that between 1986 and 2008, the share of federal income taxes paid by the top 5% of earners has risen to 59% from 43%. Between 1986 and 2009, the percentage of Americans who pay zero or negative federal income taxes has increased to 51% from 18.5%. And all this is accompanied by an increase in our national debt to 100% of GDP today from 42% in 1980.

Where will it all lead? Some despairing souls have concluded there are really only two scenarios. In one, we finally hit a tipping point where so few people actually pay for their share of the growing government that a majority become completely invested in the social welfare state, which stabilizes at some very high level of taxation and government social spending. (Think Sweden.)

In the other scenario, our welfare state slowly collapses under its weight, and we get some kind of permanent austerity after the rest of the world finally comprehends the depth of our national spending disorder and stops lending us money at low interest rates. (Think Greece.)

In other words: Heads, the statists win; tails, we all lose.

Anyone who seeks to provide serious national political leadership today—those elected in 2010 or who seek national office in 2012—owe Americans a plan to escape having to make this choice. We need tectonic changes, not minor fiddling.

Rep. Paul Ryan’s (R., Wis.) budget plan is the kind of model necessary. But structural change will only succeed if it’s accompanied by a moral argument—an unabashed cultural defense of the free enterprise system that helps Americans remember why they love their country and its exceptional culture.

America’s Founders knew the importance of moral language, which is why they asserted our unalienable right to the pursuit of happiness, not to the possession of property. Similarly, Adam Smith, the father of free-market economics, had a philosophy that transcended the mere wealth of nations. His greatest book was “The Theory of Moral Sentiments,” a defense of a culture that could support true freedom and provide the greatest life satisfaction.

Yet today, it is progressives, not free marketeers, who use the language of morality. President Obama was not elected because of his plans about the taxation of repatriated profits, or even his ambition to reform health care. He was elected largely on the basis of language about hope and change, and a “fairer” America.

The irony is that statists have a more materialistic philosophy than free-enterprise advocates. Progressive solutions to cultural problems always involve the tools of income redistribution, and call it “social justice.”

Free-enterprise advocates, on the other hand, speak privately about freedom and opportunity for everybody—including the poor. Most support a limited safety net, but also believe that succeeding on our merits, doing something meaningful, and having responsibility for our own affairs are what give us the best life. Sadly, in public, they always seem stuck in the language of economic efficiency.

The result is that year after year we slip further down the redistributionist road, dissatisfied with the growing welfare state, but with no morally satisfying arguments to make a change that entails any personal sacrifice.

Examples are all around us. It is hard to find anyone who likes our nation’s current health-care policies. But do you seriously expect grandma to sit idly by and let Republicans experiment with her Medicare coverage so her great-grandchildren can get better treatment for carried interest? Not a chance.

If reformers want Americans to embrace real change, every policy proposal must be framed in terms of self-realization, meritocratic fairness and the promise of a better future. Why do we want to lower taxes for entrepreneurs? Because we believe in earned success. Why do we care about economic growth? To make individual opportunity possible, not simply to increase wealth. Why do we need entitlement reform? Because it is wrong to steal from our children.

History shows that big moral struggles can be won, but only when they are seen as decade-long fights and not just as a way to prevail in the next election. Welfare reform was first proposed in 1984 and regarded popularly as a nonstarter. Twelve years of hard work by scholars at my own institution and others helped make it a mainstream idea (signed into law by a Democratic president) and perhaps the best policy for helping the poor to escape poverty in our nation’s history. Political consultants would have abandoned welfare reform as unworkably audacious and politically suicidal. Real leaders understood that its moral importance transcended short-term politics.

No one deserves our political support today unless he or she is willing to work for as long as it takes to win the moral fight to steer our nation back toward enterprise and self-governance. This fight will not be easy or politically safe. But it will be a happy one: to share the values that make us proud to be Americans.”

Mr. Brooks is president of the American Enterprise Institute and author of “The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America’s Future” (Basic Books, 2010).