Chart 1: Inflation Adjusted Federal Spending
The current debate (and significant wailing) about the budget proposal rolled out recently by Chairman Ryan got me thinking about whether these ‘massive cuts’ we are talking about are historically significant.
I noticed that all of the charts talk about government spending as it relates to GDP (effectively the size of our economy), and that led me to the graphic on the right here (from an earlier version of the Heritage Foundation’s Budget Chart Book).
Now that may be fair – as growing GDP indicates growing population or improving productivity or both. And more people means more government, right?
Well…
Chart 2 is a measure of that same government spending divided by the number of households in the country (and no, we are not cramming more people into households these days); this indicates that spending per household has also been increasing over time.
Now Chart 3 is the one all over the news and YouTube lately – the one where the newly proposed budget resolution ‘brutally cuts’ every program you love while keeping every program you hate; and you can see how the projections for the next 70 years show an ever-shrinking government – right?
Only it never shrinks at all! These projections are based on predictions that our economy will continue to grow at a decent pace and that we GROW government at a slower pace. So that green blob of debt that you see shrinking to nothing in the chart is getting smaller mainly in relation to the size of our economy!
So a few key points:
1. Under current policy government will continue to grow at an unsustainable pace – so any argument that the status quo ante be maintained is ridiculous. Sorry – you cannot have the current state of affairs. The enslavement of every American to support the current system cannot even save it, as it is collapsing under its own weight. The only serious option for getting things under control involves making changes to entitlements and defense spending to control their costs.
2. Under the proposed policy, the federal government STILL grows. It is cut once up front back to the level of those austere, lean years of the Bush 2 era (not so long ago, eh?), held pretty much constant for a couple of years and then allowed to grow more slowly (Chart 4). The projections assume that we grow our way out of crisis mode – only seriously getting into paying down the debt after 2020 (where you start seeing a respectable ‘surplus’ that can be used to start paying back some of those deferred tax increases. To be clear, the Republicans get the blame too – any year in which lower tax rates were not matched with lower spending (resulting in deficits) was simply a year in which a hidden tax increase was passed on to our kids.
3. Chart 5 finally illustrates clearly that this new budget proposal merely tries to stop the bleeding of red ink in federal budgets that has been going on relentlessly for decades (and has already begun a fall into the abyss that becomes catastrophic in a decade or two under current policy). In the near future it tries to get us to a point where we can tread water while growing our way out of this mess. Later it eases into a small surplus (required to pay down the debt and reduce the burden of interest payments in future annual budgets). And all of this, while vilified by all sorts of folks looking out for their own interests, is done without ANY dramatic cuts to the federal government!
The Ryan proposal seems pretty tame to me.
Chart 2: Federal Spending per Household
Chart 3: Path to Prosperity
Chart 4: Future Federal Spending
Chart 5: Deficits and Surpluses