Wednesday, January 23, 2013

The truth about spending

In recent days members of the left-wing economic brain trust including Paul Krugman, Kevin Drum, Think Progress and Matt Yglesias have all highlighted the fact that federal spending has not grown very much in recent years. Think Progress, and seemingly Drum as well, would have us believe that this greatly undermines the notion that President Obama is a big spender. 

There are at least a couple of problems with this, the first being that the president does not dictate spending levels, as spending bills must originate in Congress. In 2009 and 2010, however, President Obama's party controlled Congress by healthy margins and -- as the de facto head of the Democratic party -- the president had considerable leeway in setting appropriations levels. Here's what spending looked like during that time period:

As can be seen, over this two year period spending increased by roughly $500 billion. While one can argue this spending hike was due to automatic stabilizers that kick in during a recession such as unemployment insurance and food stamps, note that spending as of January 2011 was still $200 billion higher than when the recession officially ended.

In 2011, however, Republicans captured controlled of the House of Representatives and vowed to impose spending restraint, with the result that Obama lost some control over the federal purse strings. Here's what spending has looked like since then:

During this time period spending declined by about $70 billion. Perhaps these two paragraphs are more a case of correlation than causation, but there is good reason to doubt that's the case. 

With regard to the notion that spending should no longer be considered particularly high, meanwhile, there are problems with that argument as well. Consider this chart from the Mercatus Center showing federal spending in per capita terms adjusted for inflation (which strikes me as the best method of placing such expenditures in context):

Lest one think that the right-wing Mercatus Center is simply playing games with numbers, lefty Kevin Drum offers up pretty much the same data, although with a partisan spin:

While Drum posts this chart as an addendum to a post in which he said that "What we have is a problem with Republicans not wanting to pay the bills they themselves were largely responsible for running up," this chart actually tells a somewhat different story. The reality is that following an era of relative spending restraint, spending shot up spectacularly under Bush. Rather than take this spending back towards the level of the previous Democrat to occupy the White House, Obama actually ratcheted  spending further upwards still. Bush set the bar lower, but Obama managed to take it even lower. 

We still have a spending problem.

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