The First Amendment broadly protects political speech and the use of resources (printing presses, the internet, money) to facilitate that speech. Yet when someone wants to engage in the most obvious kind of political speech — supporting election campaigns — the government is allowed to restrict this important constitutional right. In a new case coming to the Supreme Court, Shaun McCutcheon, a wealthy political donor, and the Republican National Committee contend that the limits on political donations are unconstitutionally low and not supported by a sufficient governmental interest.
Currently, an individual may contribute up to $2,500 per election to federal candidates, up to $30,800 per year to a national party committee, and up to $5,000 per year to any non-party political committee. The Federal Election Campaign Act of 1971, as amended most recently by McCain-Feingold in 2002, also imposes an overall limit on the aggregate amount one may contribute in a two-year period. For 2011-2012, an individual could contribute up to $46,200 to all federal candidates combined, and $70,800 to political action committees and political party committees—a total of $117,000.
Of course, this isn’t the first time that the Supreme Court has dealt with contribution limits. In the seminal 1976 case of Buckley v. Valeo, the Court held that while contribution limits implicate fundamental First Amendment rights, such limits are justified if they’re closely tied to an important governmental interest, such as preventing quid pro quo corruption or the appearance thereof.
But the Court also decided that restrictions on campaign spending put a heavier burden on political expression, one which the government couldn’t justify. One of the plaintiffs’ arguments here is that the biennial contribution limits are simultaneously a limit on expenditures—a position which Cato elaborated in a new amicus brief.
We argue that Buckley’s distinction between contributions and expenditures, with limits on the former but not the latter being constitutional, is problematic. Not only does it allow infringements on the freedom of speech, but it has led to an unbalanced and unworkable campaign finance system.
Various justices over the years, some even in Buckley itself, have questioned the Court’s logic on this point. Justice Thomas in particular has assailed the distinction, pointing out that both contributions and expenditures implicate First Amendment values because they both support political debate. Moreover, candidates must spend an inordinate amount of time fundraising instead of legislating because they face an unlimited demand for campaign funds but a tapered supply. At the same time, money has been pushed away from politically accountable parties and candidates and towards unelected advocacy groups, leading to a warping of and decrease in political competition.
The special three-judge district court that first heard this case was legally bound to the framework the Supreme Court laid out in Buckley and restated that contribution limits are constitutional as such, dismissing the lawsuit. Still, Judge Janice Rogers Brown wrote that “the constitutional line between political speech and political contributions grows increasingly difficult to discern.”
In a truly free society, people should be able to give whatever they want to whomever they choose, including candidates for public office. We urge the Supreme Court to strike down the biennial contribution limits and give those who contribute money to candidates and parties as much freedom as those who spend money independently to promote campaigns and causes.
The Supreme Court will hear argument in McCutcheon v. FEC this fall.
View full post on Cato @ Liberty
Andrew J. Coulson
Just over a year ago, the Washington State Supreme Court ruled that the legislature was insufficiently funding K-12 education, and ordered it to boost that funding. A bi-partisan consensus now seems to have emerged that spending an extra $1 billion over the next two years is the proper first step in abiding with the Court’s ruling. Additional increases are likely to follow in later years. In a special budget session to begin today, the legislature will decide what balance of tax increases and economies in other areas will be used to raise the extra funds.
So Washington state taxpayers are looking at the prospect of ever higher taxes to pay for ever higher education spending far into the future. Unless business blossoms unexpectedly in the next few years, that’s liable to be economically painful. Will it be worth it? As a guide, we might look at how effective previous increases in spending have been.
Despite an increase in annual spending of $1.5 billion even after taking enrollment growth into account, academic performance has barely budged. The most hopeful signs are from the 4th (and uncharted 8th) grade NAEP scores, but there is good reason to doubt that even these very modest upticks lead to real reimprovements by the end of high school. One obvious indication of the problem is that SAT scores are essentially unchanged over the period. Another reason is that evidence from the NAEP Long Term Trends study reveals a pattern in which modest gains in the early grades evaporate by the end of high school (as can be seen on this nationwide chart of the performance of 17-year-olds). Based on the SAT scores, the same pattern likely holds in Washington state, but neither the Long Term Trends NAEP data series nor test results for older students are available at the state level.
Moreover, Washington state residents seem to drastically underestimate how much is spent per pupil in their public schools. In a 2012 survey, about half of respondents thought it was less than $8,000 / pupil. In fact, as shown in the chart above, total spending from all funds was $12,467 / pupil in that year. The survey also finds that when the public is informed about actual spending levels, support for increased K-12 spending falls dramatically (and that is true despite the fact that the survey in question misleadingly represented a lower partial spending figure as if it were total spending).
So Washington state has already tried even larger increases in spending than the one currently contemplated in Olympia with little or no academic effect. What’s the alternative? How about a proven policy for improving the achievement of students in both public and private schools that simultaneously saves millions of dollars?
View full post on Cato @ Liberty
Christopher A. Preble
Earlier this week, Harvard economist Robert Barro and Veronique de Rugy of the Mercatus Center published a short paper assessing the economic effects of defense spending. Their findings are consistent with those of other studies, including one that Cato published last year by Benjamin Zycher. To wit, from Barro and de Rugy’s abstract:
While the impact of across-the-board federal defense spending cuts on national security may be up for debate, claims of these cuts’ dire impact on the economy and jobs are grossly overblown…
[A] dollar increase in federal defense spending results in a less-than-a-dollar increase in GDP when the spending increase is deficit-financed…
[O]ver five years each $1 in federal defense-spending cuts will increase private spending by roughly $1.30
The Barro-de Rugy paper should be of particular interest to Republican politicians and those who advise them. 2012 GOP presidential candidate Mitt Romney and his fellow Republicans attracted considerable scorn (including from yours truly) during a campaign in which they railed against government spending, but also wailed against military spending cuts. His critique was not primarily, or even chiefly, about the potential impact of sequestration on national security; rather, echoing the hardly objective estimates flogged by the Aerospace Industries Association and the National Association of Manufacturers, Romney asserted that cuts in military spending would result in the loss of hundreds of thousands of jobs.
Romney, of all people, should have known better. Government spending extracts resources from the private sector, in the form of taxes and/or debt, and the net effect of this spending is negative over the medium to long term. Barro and de Rugy show that the gains, to the extent that there are any, are particularly short-lived. The reverse is also true: Cuts in spending might result in brief declines in GDP, but Barry and de Rugy conclude that “the adverse effects … will be minor even in the short run.” “In the longer run,” they continue:
when reduced public debt and taxes … are factored in, real GDP should be higher than otherwise. This conclusion is consistent with findings that a smaller share of government consumption in GDP tends to enhance long-term economic growth.
There may be grounds for objecting to defense cuts based on reasoned arguments that these spending reductions would impair national security. But Keynesian arguments that a smaller defense budget will retard economic growth are not convincing.
I would like to believe that such findings would be sufficiently compelling to warn Republicans away from their embrace of military spending as a jobs program once and for all. But, as Tad DeHaven has observed here and here, such situational Keynesianism is a seemingly permanent feature of the nation’s political landscape.
View full post on Cato @ Liberty
Conservative and libertarian scholars are clashing over the findings and political implications of the new Heritage Foundation immigration study. The study spans 92 pages and is jam-packed full of statistics and detailed calculations.
I’ll leave the immigration policy to my colleagues who are experts in that area. To me, the study provides a very useful exploration into how massive the American welfare state has become. Here are some highlights:
- “There are over 80 of these [means-tested] programs which, at a cost of nearly $900 billion per year, provide cash, food, housing, medical, and other services to roughly 100 million low-income Americans.”
- “The governmental system is highly redistributive … For example, in 2010, in the whole U.S. population, households with college-educated heads, on average, received $24,839 in government benefits while paying $54,089 in taxes … [and] households headed by persons without a high school degree, on average, received $46,582 in government benefits while paying only $11,469 in taxes.”
- “Few lawmakers really understand the current size of government and the scope of redistribution. The fact that the average household gets $31,600 in government benefits each year is a shock.”
Total federal, state, and local government spending in 2010 was $5.4 trillion, or $44,932 per U.S. household. The figure of $31,600 in “benefits” is total spending less spending on public goods, interest, and government pensions.
A useful feature of the Heritage study is a breakdown of the $5.4 trillion in spending into six categories constructed by the authors. “Direct benefits” includes mainly Social Security and Medicare. “Pure public goods” includes programs such as defense and scientific research. “Population-based services” includes programs aimed at whole communities, such as police and highways. (Some of these also seem to be public goods). “Means-tested benefits” includes programs such as food stamps. Education includes both K-12 and college subsidies. “Interest and pensions” is the current costs of past spending, which includes servicing the debt and paying for government pensions. The chart shows spending in 2010.
This spending breakdown is useful for thinking about the proper size of government. From a libertarian standpoint, governments ought to be spending only on public goods and population-based services, as a first cut. That would be $1.94 trillion, or just 36 percent of the current total of $5.4 trillion. As a percent of GDP in 2010, that would be spending of 14 percent, rather than current spending of 38 percent.
But some of the population-based services mentioned by the authors could be privatized, and spending on some of the public goods could be cut. So a good libertarian target might be less than 36 percent of current spending, or less than 14 percent of GDP.
The Heritage study is sparking a debate about what type of immigration reform the nation should have. But hopefully, it will also spur more discussion about the massive size of the American welfare state. Immigration is partly, or mainly, such a contentious issue because we have such a huge welfare state.
The study includes projections about how many trillions of dollars of government benefits will flow to immigrants and their children in the decades ahead. But conservatives and libertarians agree that we ought to cut trillions of dollars in benefits to immigrants and nonimmigrants alike.
So is there some common ground here? Can we work toward an immigration reform that cuts government dependency in general and downsizes the welfare state?
View full post on Cato @ Liberty
Daniel J. Mitchell
Paul Krugman recently tried to declare victory for Keynesian economics over so-called austerity, but all he really accomplished was to show that tax-financed government spending is bad for prosperity.
More specifically, he presented a decent case against the European-IMF version of “austerity,” which has produced big tax increases.
But what happens if nations adopt the libertarian approach, which means “austerity” is imposed on the government, rather than on taxpayers?
In the past, Krugman has also tried to argue that European nations have erred by cutting spending, but this has led to some embarrassing mistakes.
- He asserted that “British growth has stalled” because of “spending cuts,” but he overlooked the elementary fact that government spending in the U.K. was growing twice as fast as inflation.
- And in the case of Estonia, where there actually were genuine spending cuts, he wanted people to somehow think that those cuts in 2009 were responsible for an economic downturn that occurred in 2008.
Now we have some additional evidence about the absence of spending austerity in Europe. A leading public finance economist from Ireland, Constantin Gurdgiev, reviewed the IMF data and had a hard time finding any spending cuts:
…in celebration of that great [May 1] socialist holiday, “In Spain, Portugal, Greece, Italy and France tens of thousands of people took to the streets to demand jobs and an end to years of belt-tightening”. Except, no one really asked them what did the mean by ‘belt-tightening’. …let’s check out expenditure side of Europe’s ‘savage austerity’ story… The picture hardly shows much of any ‘savage cuts’ anywhere in sight.
As seen in his chart, Constantin compared government spending burdens in 2012 to the average for the pre-recession period, thus allowing an accurate assessment of what’s happened to the size of the public sector over a multi-year period.
Here are some of his conclusions from reviewing the data:
Of the three countries that experienced reductions in Government spending as % of GDP compared to the pre-crisis period, Germany posted a decline of 1.26 percentage points (from 46.261% of GDP average for 2003-2007 period to 45.005% for 2012), Malta posted a reduction of just 0.349 ppt and Sweden posted a reduction of 1.37 ppt.
No peripheral country – where protests are the loudest – or France et al have posted a reduction. In France, Government spending rose 3.44 ppt on pre-crisis level as % of GDP, in Greece by 4.76 ppt, in Ireland by 7.74 ppt, in Italy by 2.773 ppt, in Portugal by 0.562 ppt, and in Spain by 8.0 ppt.
Average Government spending in the sample in the pre-crisis period run at 44.36% of GDP and in 2012 this number was 48.05% of GDP. In other words: it went up, not down.
…All in, there is no ‘savage austerity’ in spending levels or as % of GDP.
I’ll add a few additional observations.
Switzerland isn’t an EU nation, so it’s not included in Constantin’s chart, but government spending as a share of economic output also has been reduced in that nation over the same period, and the Swiss economy also is doing comparatively well.
The moral of the story is that reducing the burden of government spending is the right recipe for sustainable and strong growth. Growth also is far more likely if lawmakers refrain from class-warfare tax policy and instead seek to collect revenue in ways that minimize the damage to prosperity.
Unfortunately, that’s not happening in Europe…and it’s not happening in the United States.
A few countries are moving in the right direction, such as Canada, but with still a long way to travel.
The best role models are still Hong Kong and Singapore, and it’s no coincidence that those two jurisdictions regularly dominate the top two spots in the Economic Freedom of the World rankings.
View full post on Cato @ Liberty
It drives a lot of us at Cato nuts to read news stories almost every day which simply assume that government spending is good for the economy. Any defense or nondefense spending restraint will hurt economic growth, it is assumed. Even a recent AEI study seemed to accept this Keynesian concept.
Government spending certainly helps the government-dependent parts of the U.S. economy. But most Americans live in the private economy, and so they might like to know how government budget actions affect the economy that they live in.
So let’s explore the spending-to-growth relationship with national income accounts data. I ran a simple regression with 60 years of data, 1953 to 2012. The variable I was trying to explain was real private GDP growth. Private GDP is total GDP less the government portion of GDP from Table 1.1.5. The explanatory variable was total (federal/state/local) government spending from Table 3.1. Both variables were converted to constant dollars using the GDP deflator.
The chart below shows the Excel plot of the results. The downward slope of the trend line means that higher government spending growth in a year corresponds to reduced private GDP growth that year. For example, if real government spending growth was zero, private GDP would be expected to grow at 4.2 percent. If real government spending growth was 5 percent, private GDP growth would be expected to fall to 2.8 percent.
The F-statistic for the regression was 4.1 indicating overall significance at the 95 percent level, which is the usual level economists look for to be confident of a solid relationship. The T-statistic on the government spending variable was 2.0, which indicates significance at over 95 percent. (Note that the statistical results were even stronger when I included data back to 1946 because post-war government cuts coincided with robust economic growth.)
The R-square of the regression was low, indicating that changes in government spending only explained a small portion of current-year GDP growth. That makes sense because a myriad of other factors affect GDP growth, including economic growth in other countries, regulatory factors, oil industry shocks, technology shocks, etc.
Note that my explanatory variable was total government spending, which includes government production and government transfers. I think that both types of government spending harm the private economy. If the government increases UI payments or food stamps, for example, it induces fewer people to work.
Personally, I’m suspicious of statistical “proofs” of economic relationships. But I do think that even broad-brush results such as this should give pause to the reporters and policy wonks who often write articles with hidden Keynesian assumptions. I think that the harm from increasing government spending affects the economy over a longer period of time. But even these single-year regression results suggest that people should be skeptical of the widely held notion that the economy is like a car and the government can speed things up by simply stepping down on the spending gas peddle.
P.S. I’m happy to share my data upon request if people want to check for any Reinhart-Rogoff problems.
View full post on Cato @ Liberty
Entitlement Spending Is America’s Biggest Fiscal Challenge, but Discretionary Spending Is Still Far too High
Daniel J. Mitchell
If America descends into Greek-style fiscal chaos, there’s no doubt that entitlement programs will be the main factor. Social Security, Medicare, Medicaid, and Disability are all fiscal train wrecks today, and the long-run outlook for these programs is frightful.
Simply stated, if we don’t implement the right kind of entitlement reform, our children and grandchildren at some point will curse our memory.
But that doesn’t mean we shouldn’t worry about other parts of the budget, including the so-called discretionary programs that also have been getting bigger and bigger budgets over time.
That’s why I want to add some additional analysis to Veronique de Rugy’s recent piece in National Review Online, which might lead some to mistakenly conclude that these programs are “shrinking” and being subject to a “Big Squeeze.”
…there is another number to look at in that budget. It’s the shrinking share of the budget consumed by discretionary spending (spending on things like defense and infrastructure) to make space for mandatory spending and interest. This is the Big Squeeze. …in FY 2014 mandatory spending plus interest will eat up 67 percent of the budget, leaving discretionary spending with 33 percent of the budget (down from 36 percent in FY 2012). Now by FY 2023, mandatory and interest spending will consume 77 percent of the total budget. Discretionary spending will be left with 23 percent of the budget.
She’s right that discretionary spending is becoming a smaller share of the budget, but it’s important to realize that this is solely because entitlement outlays are growing faster than discretionary spending.
Here’s some data from the Historical Tables of the Budget, showing what is happening to spending for both defense discretionary and domestic discretionary. And these are inflation-adjusted numbers, so the we’re looking at genuine increases in spending.
As you can see, defense outlays have climbed by about $100 billion over the past 50 years, while outlays for domestic discretionary programs have more than tripled.
If that’s a “Big Squeeze,” I’m hoping that my household budget experiences a similar degree of “shrinking”!
Veronique obviously understands these numbers, of course, and is simply making the point that politicians presumably should have an incentive to restrain entitlement programs so they have more leeway to also buy votes with discretionary spending.
But I’d hate to think that an uninformed reader would jump to the wrong conclusion and decide we need more discretionary spending.
Particularly since the federal government shouldn’t be spending even one penny for many of the programs and department that are part of the domestic discretionary category. Should there be a federal Department of Transportation? A federal Department of Housing and Urban Development? A federal Department of Agriculture?
No, NO, and Hell NO. I could continue, but you get the idea.
The burden of federal government spending in the United States is far too high and it should be reduced. That includes discretionary spending and entitlement spending.
P.S. For those who don’t have the misfortune of following the federal budget, “entitlements” are programs that are “permanently appropriated,” which simply means that spending automatically changes in response to factors such as eligibility rules, demographic shifts, inflation, and program expansions. Sometimes these programs (such as Social Security, Medicare, Medicaid, etc) are referred to as “mandatory spending.”
The other big part of the budget is “discretionary spending” or “appropriations.” These are programs funded by annual spending bills from the Appropriations Committees, often divided into the two big categories of “defense discretionary” and “nondefense discretionary.”
View full post on Cato @ Liberty
Benjamin H. Friedman
The Obama administration $640.5 billion fiscal year 2014 request for military spending authority is predictably unrealistic and excessive. Still, political circumstance continues to drag the Pentagon toward fiscal restraint.
That $640.5 billion includes $88.5 billion for war (a.k.a. overseas contingency operations), $526.6 for non-war spending in the Department of Defense, and another $25.4 billion spending outside DoD, mostly for nuclear weapons in the Department of Energy, which officially counts as “national defense” or budget function 050 spending.
Those spending levels ignore the budgetary cap set by law and the political reality it reflects. The $552 billion requested in 2014 for non-war “national defense” spending exceeds by $55 billion the spending cap set by the 2011 Budget Control Act, as amended by the American Taxpayer Relief Act of 2012. Were Congress to enact the president’s budget and leave the cap in place, that total would be sequestered equally across “defense” spending categories, including the war.
Even if Congress agrees to a grand bargain altering the caps, military spending will likely face additional cuts. Republican resistance to tax hikes and Democratic protection of entitlements mean that any deal they cut will likely again target discretionary spending, more than half of which goes to the military. Of course, Congress’ failure thus far to undo this year’s more onerous sequestration suggests that no deal is likely. An over-under on where the non-war Pentagon budget winds up for 2014 would be closer to $500 billion than $550 billion.
In a certain light, there is some sacrifice here. The non-war DoD request of $526.6 billion is just $1.2 billion more than last year’s request. Factoring in inflation, it’s about a 1.5 percent cut. This budget would bring the portion of GDP going to the military to 4 percent, versus. 4.3 percent this year, according to the administration. And as Russell Rumbaugh points out, DoD’s projected spending over ten years is down $114 billion from a year ago.
On the other hand, the request would be a substantial increase over the $493 billion that the Pentagon actually got from Congress this year, after sequestration (see page 10 here). Economic growth is the main reason that a declining portion of national wealth is going to the military. And the cuts scheduled over the decade would arrive mostly in its second half, when someone else is president, meaning that the cuts are basically imaginary.
Additionally, the “placeholder” request of $88.5 billion in Pentagon funds for war—the same as last year—is suspiciously high. The administration says they will revise the request once they determine force levels in Afghanistan. But the president already announced plans to halve total U.S. troops there from 68,000 to 34,000 by next February. Even with the increased cost from exiting, the total cost should be far lower. The Pentagon is likely continuing to use the war budget to dodge caps and fund personnel and other non-war functions. Meanwhile, the administration still claims to support a ten-year cap on war spending. As Charles Knight and I explain here, that is a feckless gesture at a good idea.
One reason why the Pentagon request is unrealistically and unnecessarily large is that it’s part of a struggle with Republicans over the shape of deficit reduction. The White House may be holding military spending cuts in reserve to offer as an alternative to tax increases that Republicans will refuse. Another, more fundamental, reason is that the administration remains wedded to the liberal internationalist species of the militarist consensus that sees U.S. military power as the linchpin to global stability, trade, and liberalization. Here are some newer arguments against that bipartisan consensus. Hopefully the new secretary of defense, Chuck Hagel, shares some of that skepticism and will demonstrate it once he has time to guide the budget.
Given our safety, we should stop spending on the military as we did at the height of the Cold War. The Pentagon budget should comply with the spending cap by making choices among missions and goals, rather than clinging to existing alliances and ambitions. The cuts on offer are mostly efficiencies—they require doing the same things more cheaply. Some reforms of this kind, like the administration’s proposal to increase TRICARE fees and start another Base Realignment and Closure (BRAC) round, can save big bucks, though Congress will probably ignore them. Bigger cuts require larger choices. If, for example, we shed allies and the pretension that stability everywhere depends on our military presence, far deeper cuts to each service, especially the ground forces, are possible. We could cut a leg or two of the nuclear delivery-vehicle triad without sacrificing deterrence. One virtue of austerity is to encourage these sorts of overdue choices.
View full post on Cato @ Liberty
Government Spending Per Household Exceeds Median Household Income
As reported in my new book, “Completely Predictable,” the combined spending of federal, state and local governments actually exceeded the median household income for 2010, which is the latest year for which all relevant government data are available.
In fiscal 2010, according to numbers published by the Census Bureau and the Office of Management and Budget (OMB), net spending by all levels of government in the United States was $5,942,988,401,000. That equaled $50,074 for each one of the 118,682,000 households in the country.
In that same year, according to the Census Bureau, the median household income was $49,445.
That means total net government spending per household ($50,074) exceeded median household income (49,445) by $629.
Government in the United States, of course, has not always spent more per year than the median household earns. As recently as 2000, the relationship between government spending and household income was dramatically different.
Data from the Census Bureau and the OMB show that in that year net spending by all levels of government was $3,239,913,876,000. That equaled $29,941 for each of the nation’s then 108,209,000 households. In 2000, the median household income was $41,990.
Thus, between 2000 and 2010, government in this country went from spending $12,049 less than the median household income to spending $629 more.
This is how I derived these startling numbers:
First, I took the figure for each year’s total state and local government spending (published by the Census Bureau) and subtracted from it the money that state and local governments had received from the federal government. That left the net total of state and local spending for the year.
Then I took the total federal government spending for the year (published by OMB) and subtracted from it the money the Census Bureau said state and local governments had sent to the federal government. That left net total federal spending.
I then added the net total of state and local spending to the net total of federal spending to get the net total of all government spending for the year.
I divided that number by the number of households in the country that year (published by the Census Bureau) to get total net government spending per household.
In 2000, according to the Census Bureau, state and local governments spent a total of $1,746,942,699,000 and received $291,949,750,000 from the federal government, leaving net total state and local spending at $1,454,992,949,000.
The federal government spent a total of $1,788,950,000,000 in 2000, according to OMB, and received $4,029,073,000 from the states, leaving the net total of federal spending at 1,784,920,927,000.
The net total state and local spending of $1,454,992,949,000 and the net total federal spending of $1,784,920,927,000 combined for a net total of $3,239,913,876,000 in all government spending in 2000. Dividing by the 108,209,000 households the Census Bureau said were in the United States that year equals $29,941 — or $12,049 less than the 2000 median household income of $41,990.
Similarly, in 2010, according to the Census Bureau, state and local governments spent a total of $3,114,846,571,000 and received $623,732,004,000 from the federal government, leaving net total state and local spending for that year at $2,491,114,567,000.
The federal government spent a total of $3,456,213,000,000 in 2010, according to OMB, and received $4,339,166,000 from the states, leaving the net total of federal spending at $3,451,873,834,000.
The total net state and local spending of $2,491,114,567,000 and the total net federal spending of $3,451,873,834,000 combined for a total net $5,942,988,401,000 in government spending in 2010. Divided by the 118,682,000 households the Census Bureau said were in the United States that year, that equals about $50,074 — or $629 more than the 2010 median household income of $49,445.
I calculated the total net government spending per household in 2010 for my new book, “Completely Predictable.” I think the number demonstrates how completely predictable the fiscal crisis our country faces has become.
A nation whose government spends more than the typical family earns is on the road to ruin.
Statistics: Posted by yoda — Thu Apr 11, 2013 10:23 am
View full post on opinions.caduceusx.com
President Barack Obama’s new budget proposes to spend $3.78 trillion in 2014, which would be 27 percent higher than spending in 2008. President Obama believes in expansive government, and he is proposing a range of new programs, including subsidies for infrastructure, preschool, and mental health care.
However, total federal outlays increased substantially faster under President George W. Bush than they have under Obama so far. It is true that Obama’s spending ambitions have been restrained by House Republicans. But looking at the raw data, it appears that the last Republican president was more profligate than the current Democratic one.
The figure shows total federal outlays, but the data is adjusted to exclude the TARP bailout amounts for all years. The Congressional Budget Office now says (page 15) that TARP will end up costing taxpayers just $22 billion overall. Yet the official federal outlay figure for 2009 included $151 billion in estimated TARP costs. That number has since been re-estimated and mainly reversed out of later-year spending totals. Therefore, TARP must be removed from federal spending totals to avoid a distorted picture of budget growth.
The figure indicates that spending jumped from $1.86 trillion in 2001 to $2.98 trillion in 2008. That’s a 60 percent jump in seven years under Bush, which works out to an annual average growth rate of 7.0 percent. (All data cited here are for fiscal years).
Then comes 2009. Usually this year would be assigned to the outgoing president because the new president comes in part way during the year and typically does not make substantial changes to the current-year budget. But Obama took steps to immediately boost spending in 2009, including pushing through the giant stimulus bill. The CBO has reported that stimulus outlays were $114 billion in 2009.
In Bush’s last budget, he proposed that 2009 spending be $177 billion above the 2008 level, but the actual increase ended up being a massive $386 billion. So you can see that Obama and Congress were mainly responsible for the huge spending leap in 2009, not Bush.
So let’s assign 2009 to Obama and measure his spending from a base in 2008 ($2.98 trillion) to his newly proposed spending for 2014 of $3.78 trillion. Spending increased 27 percent over those six years, or 4.0 percent annually. That’s far too much, but still substantially less than the 7.0 percent growth rate under Bush.
Here is another comparison:
- Spending growth in Bush’s first seven years: 4%, 8%, 7%, 6%, 8%, 7%, 3%, 9%.
- Spending growth in Obama’s six years: 13%, 6%, 2%, -3%, 5%, 2%.
Partisan Republicans are probably tired of fiscal conservatives and libertarians complaining about Bush’s big spending, especially when Obama has done so much damage to limited government. But Republicans are fooling themselves if they think that the overspending problem has been confined just to the other party. The sooner people understand that overspending it is a deep and chronic disease with bipartisan roots, the sooner we can start finding a lasting cure.
Yesterday the New York Times profiled a conservative group that is embracing higher federal infrastructure spending, apparently at the behest of pro-spending lobby groups. And here is another conservative group in favor of more federal spending on infrastructure, and indeed, more central planning of it. But there is nothing the slightest bit “conservative” about nationalizing spending activities that can be done—and would be done better—by state governments and the private sector.
- Obama’s new federal budget—spends way too much.
- Bush’s budgets—spent way too much and created a precedent for Obama.
- Some conservative groups—not conservative on spending.
- Believers in a small federal government—facing a huge challenge.
- Federal spending—reduces freedom, damages growth, harms the environment, destroys federalism and diversity, misallocates resources, undermines individual responsibility, and is often wasteful and bureaucratic.
- The Republic—threatened by a non-stop bipartisan spending spree.
- Solutions to all this—can be found at www.DownsizingGovernment.org.
View full post on Cato @ Liberty