Please read this if you think deficits don't matter and that spending doesn't drive deficits.
Empirical evidence also suggest that spending cuts alone are better than combined spending cuts and tax increases...
Seems self-explanatory really, yet neither the Democrats or the Republicans appear to be aware of this.
...Continued at the linked webpage.Columnist Ron Hart writes:
Hart also slags Republicans, who continue to push for more military spending despite the grim fact that we are already spending close to half the planet's dollars on that score.
Do you need another indicator that spending - and not simply tax receipts weakened by a bad economy and carve-outs for the top 2 percent of earners - is the root cause of the federal deficit? Then take a look at this chart:
It's understandable why government spending trends separate from revenue during recessions. At the same time that more people are out of work and receipts go down, demand for various welfare programs (unemployment, food stamps, etc) increases.
What was different in many ways during the thick of the Bush years was that spending continued to increase during the good times, too. In 2001, Bush took the reins of a government that was spending 18.2 percent of the economy. By 2008, government spending equaled 20.8 percent of the economy. It then spiked to 25.2 percent of GDP in 2009 (a budget year for which some expenses were Obama's but most were Bush's). That sort of massive divergence is explainable in light of the fiscal crisis and the Bush and Obama administrations' responses to it. In my my view, those responses were both hysterical, counterproductive, and at least in regard to the auto bailout, illegal. Whether you agree with me on any of that, you should be worried about whether the boost in spending as a percentage of GDP is a temporary blip or the new normal.
Certainly, it should worry all of us that President Obama's budget proposal released earlier this year envisioned a decade in which the federal government on average spends 22.5 percent of GDP (Table S-1) and that the budget plan passed by the Republican House would have government spending average 20 percent over the same time period. In terms of paying for such levels of spending, each is well above the historical average of tax receipts since 1950. In fact, the GOP plan even estimates tax revenue over the next 10 years at just 18.3 percent of GDP, ensuring more debt and deficits (Table S-1). And the GOP is supposed to be the party of budget hawks, right?
Check out Table 1.3 of the Office of Management and Budget (OMB) historical tables to get a sense of several decades' worth of spending trends. From 1950 through the mid-1970s, it was rare to see the feds spending 20 percent or more of the economy. Now - with the exception of the final Clinton years and the start of Bush's presidency, that seems to be the rule. Given that tax receipts over the same period have averaged below 18 percent of GDP, there's no surprise that the nation's debt continues to grow. At more than $16 trillion, our debt is now equal to the size of the economy. That's not a good thing (for reasons I'll get to in a second).
Here's a different chart that also helps explain the role of government spending in deficits:
That's what the feds spend per person in inflation-adjusted dollars. It's gone from just north of $6,000 at the start of the Carter years to just shy of $12,000 at the end of Obama's first term. Something similar has been happening at the state level, too, so it's not as if the feds are picking up the slack from other levels of government.
Here's some awful info from a 2009 Reason story about state spending sprees during the good years in the Aughts:
Empirical evidence also suggest that spending cuts alone are better than combined spending cuts and tax increases...
Seems self-explanatory really, yet neither the Democrats or the Republicans appear to be aware of this.
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