Thursday, April 28, 2011

Chart of the day

Click to enlarge
Following my recent post highlighting the dangers of relying too much on GDP percentages to calculate the fiscal burden of government, I thought it might be worthwhile to compare federal spending as a percentage of GDP against federal spending per capita in real terms. This chart is what I came up with (forgive the labeling on the x-axis, which is a bit sloppy. Not sure how to make it better).

A few notes:
  • We are currently spending more money per capita than at the height of World War II when federal expenditures were roughly at half of GDP. Think about that.
  • There is a saying that "war is the health of the state" and this appears to be borne out in the chart, with wars exerting a ratchet effect on federal spending. In the years before World War I federal spending was never more than $240 per capita. After the war's conclusion spending never dipped below $370 (about a 50% increase). Also note the twin ratchet effects from World War II and the Korean War. In 1935 per capita spending was $936 -- 20 years later it was roughly four times greater.
  • The 1990s was one of the few times that government spending per capita actually declined, before surging again under George W. Bush. The 1950s and early 60s, described here as Paul Krugman's "political Eden," also saw relatively restrained growth in government per capita expenditures.
  • Since about the mid-1960s per capita expenditures have surged even while spending in terms of GDP has held somewhat constant. Thus, any proposal that merely aims to hold federal spending somewhere in the high teens in GDP terms -- considered radical in the current environment -- is in reality guaranteed to assure ever-larger government.

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