From a January 27 editorial in the Wall Street Journal:
“Eighteen months after the recession formally ended, the federal deficit for fiscal 2011 (through September) is expected to increase once again, this time to $1.48 trillion, or 9.8% of GDP. That's a share of GDP topped since World War II only by the 10% reached in Mr. Obama's first year in office, when at least the recession was an excuse. The annual deficit in the 1980s never exceeded 6% of GDP.
As the nearby chart shows, the main culprit is spending. After falling slightly last year due in part to TARP repayments, federal outlays will climb again this year to 24.7% of GDP. Overall federal spending will have increased by $1 trillion in a mere four years. Without spending cuts, outlays will remain above 23% for the rest of the decade—starting to rise again once ObamaCare becomes fully phased in. (The outlay average from 1971 to 2010 was 20.8% of GDP.)”
There are so many objectionable comments in this piece that it is hard to know where to start. So I decided to focus on what has become received wisdom on the Right these days, and, because of the feckless acceptance by the Democrats of a Republican narrative, is generally understood to be true.
It is encapsulated in these sentences from the editorial:
"After falling slightly last year due in part to TARP repayments, federal outlays will climb again this year to 24.7% of GDP."
and
"The GOP-Obama tax deal will also keep revenues as a share of GDP below 15% in 2011."
The entire article is built on this comparison, and the accompanying chart. But it's misleading, as a look at the actual numbers would show. Here’s a summary:
GDP in 2011 is expected to be about $15 trillion. Federal Revenues will be about $2.3 trillion, or about 15% of GDP. Federal expenditures are expected to be about $3.6 trillion, or roughly 25% of GDP. So far, so good --precise numbers are surprisingly difficult to come by, at least in a half-hour of basic web-searching--, but this is as the article says, or implies.
By the way, according to the World Almanac for 2001, US federal government expenditures were $1,863,039,000,000 --about half of the projected 2011 level. Doubling in ten years sounds like a lot, but the old "Rule of 72" tells us that this would be an annual growth rate of 7% or so had it been spread evenly across the period. Still, population growth has been roughly 1% per year; so the increase is still substantial.
Federal government spending, as a percentage of GDP, was just under 18% in 2000; it grew slowly (okay, inexorably) for the first several years of the Bush II administration, until it was 19.38% in 2007, In 2009, it was 24.67% of GDP --it grew by more than four percentage points, or nearly 20%, in just one year, from 2008 to 2009 --way more than the ten-year average.
So what happened to government spending between 2008 and 2009, to account for that enormous growth?
Well, spending grew, all right: from 2.75 trillion in 2008 to 3.2 trillion in 2009. This is nothing to sneeze at; it's an increase of 16%. But GDP fell between those 2 years, by 2.5%. This made the growth more than a full percentage point higher than it otherwise would have been: had GDP merely stayed the same, spending as a percent of GDP would have grown by almost exactly 24% --still high; and if GDP had grown by even 2% (less than its average growth during the Bush II years), spending as a percent of GDP would have grown to 23.2%. Of course, if GDP had not fallen, we wouldn't have had a recession, and substantial amounts of the spending growth would not have occurred.
Revenues, meanwhile, went from 2.5 trillion in 2008 to an estimated 2.1 trillion in 2009. Correct: a drop of 400 billion dollars, over 15%.
So, when the WSJ article says, "As the nearby chart shows, the main culprit is spending," it is simply wrong. Revenues fell by almost the same amount that spending grew.
The fact is, if we step back, we had, between Bush's final full year (2008) and Obama's first (partial) year (2009), an increase in government expenditures of $450 Billion, and a drop in revenues of $417 Billion. So it's not too hard to see why the deficit "under Obama" has ballooned. And most of us, regardless of our opinion of federal spending, would not expect, or want, to see a drop big enough to make up that difference in a single year*.
*I would be in the minority, here: I'd be happy to see a one-year cut in defense from $700 billion to $200 billion. But then I'm a Muslim-loving socialist.
I admit that when you lay out the actual numbers it's not nearly as sexy as using the percentages. But it would be well to remember that percentages involve both a numerator and a denominator. It's easy to see what happened here; it's what anyone would expect in a huge, crashing recession.
And as long as we're looking at that WSJ chart of "The Spending Boom," we might just notice that, according to the chart, average revenues and average expenditures, as a percent of GDP, have been, since 1971, 3 percentage points apart. That's exactly what the chart projects for the future:
Ought Obama to have avoided spending as much as he did? Maybe you can argue that, although not many serious people do --certainly the Republicans in Congress, along with GWB, were happy to install the TARP back in the weeks before Obama was elected. You cannot seriously argue that Obama has been on some sort of unprecedented, breakneck spending spree.
But you can make it look like that, if your political agenda requires it.
[sources for the figures: http://www.
