Government spending

All Republicans, as an article of faith, champion smaller government and lower government spending. They do so, despite ample evidence that neglected public infrastructures, including education and transportation, stifle economic growth. And, we have heard loud and clear from the myriad GOP presidential candidates that boosting the economy is vitally important and that each of them has a plan to raise GDP, with Jeb Bush claiming that his programs would achieve four-percent annual growth rates, a level not seen since the Clinton era.

real gdp to August 2014

Nor should we forget that the Republicans’ answer to all problems is to lower taxes. The money denied government would, as if by magic, spur a rising tide of economic growth, lifting all boats, including the millions currently under water.

What is most ironic in the Republicans’ obsession with smaller government is that government spending as a percentage of GDP is at the lowest level since the end of WWII.

real government spending:gdp to 2014png

I looked at data from the St. Louis FED. Here are the average spending levels per decade. So, for example, government spending in the 1950s averaged 34 percent of GDP.

real government spending:gdp by decade

I then charted spending levels at each of the above percentages.

government spending:gdp by decade averages

Now let’s look at the differences in spending between the hypothetical and actual levels by decade. That is, how much more (or less) money would the government had spent all told had it maintained the averages for each of the decades?

government spending differences

You will hear from Republicans and too many Democrats that the United States cannot possibly afford to end poverty, properly educate its citizens, use energy more efficiently, or transport people in safety and comfort. Well, had federal spending kept at levels of the 1950s, we would have collectively spent nearly $53 trillion more than we did! At the level of the 1960s, the U.S. would have spent over $45 trillion more than actual—and so on. However, applying the spending levels of the last three decades to the pre-1990 era, the U.S. would have spent considerably less over all than it actually did, as much as $22.5 trillion at the 2010 through 2015 average.

These counterfactuals did not occur because tax rates were lowered since the end of WWII. With lower tax rates come reduced revenues. So, if the money did not go to government, who got it? If you answered, “The Rest of Us,” you would be wrong.