Wednesday, February 18, 2009

Gov't Spending Doesn't Work? The Facts Prove Otherwise

Below is a chart from the government's own historical tables on the budget, from 1930 until now. The graph is government spending as a percentage of GDP. Large increases in spending were followed by boom times, while contractions in spending preceeded recessions or market downturns.

Now, the dirty little secret that "supply-siders" will never admit to: that spending under Reagan was the highest in the post WWII period. That, along with tax cuts, put the economy on steroids. However, without the spending (tax cuts alone), there never would have been a "Reagan boom."


googleheim said...

What % of GDP is the TARP + Stimulus + anything else coming = to all together ?

Why do we not include foreign income, GNP and forex swaps and all that into our ledger of "assets" ??

mike norman said...

I've seen reports that claim it's as high as $9.5 trillion, but I don't know what's real, what's actually spent, what's pledged, etc. If you take current outlays of about $300 billion per month so far for this fiscal year and extend that out for 12 months, that comes to $3.6 trillion for FY2009, so I rounded it to $4 trillion. It could be more. My numbers are based on $4 trillion in outlays for FY 2009.

Foreign income is a component of national income. Foreign currency positions are an asset on the Fed's balance sheet, offset by liabilities, such as reserve balances and currency in circulation, etc.