Here’s an interesting chart I put together from data taken from the Bureau of Economic Analysis.
It shows the quarter-over-quarter average percentage increase in government spending under presidents Reagan through Obama. As you can see, average levels of government spending were highest under Reagan, by a huge margin. We had a boom back then. Next was Bush, then Clinton, then Bush I and last, but not least, was Obama. Average quarterly increases in gov’t spending under Obama have been a miserly 0.7%. This data belies the claim that spending has surged. The nominal amounts are large, yes, but the percentage increases have been very modest. In contrast, Reagan put the pedal to the metal.
Average quarter-over-quarter percentage gain in government spending
Reagan 3.5
Bush I 1.4
Clinton 1.7
Bush II 2.1
Obama 0.7
yes, thank you for that info.
ReplyDeleteplus - Carter and Clinton were the only to make deficit spending go to a negative rate in the past 50 years. just check any wiki
sometimes the truth is just way too hard to bear.
ReplyDeleteHow is it possible that I of all people am more staunchly supportive of Reagan's economic policy than I am of Clinton or Obama!?!?!?! And how is it that Tea Partiers (although they don't realize this) are more in support of democratic economic policy than I am!??!!?!
WTF is going on here!??!
According to MMT the size and sign of the fiscal balance are irrelevant as absolutes. The only things that count are the mix of fiscal, monetary and regulatory policy wrt to the prevailing conditions and trends. This is determined by sectoral balances, Minskyian fragility, and functional finance. The fiscal balance is always assessed relative to achieving and maintaning full employment and price stability.
ReplyDeleteSo looking at historical charts is pointless without an MMT commentary of the wisdom of the fiscal balance at the time from the standpoint of MMT analysis and criteria.
tom, am i mistaken or are these #s not even fiscal balances (iwo, gross spending not net of taxes, etc)?
ReplyDeleteYou are correct, selise. As I recall, the big rise under Reagan was due to military spending. The big deficit under Reagan was not raising taxes to offset it. As a general principle taxes should always be raised to offset military spending because military spending is inherently inflationary, since it injects NFA but does not increase domestic supply.
ReplyDeleteThe fundamental problem of the US is that military spending is now integral to the economy. Instead of raising taxes to control inflation, the tactic is to use global labor arbitrage, union-busing, etc, to depress wages instead. The injection from military spending therefore flows into asset appreciation.
This is capitalism based on unending war and exploitation of global labor and resources to support it.
"it injects NFA but does not increase domestic supply."
ReplyDeleteTom what do you mean domestic supply not increasing? I am not following that part but all the rest makes sense to me...and is sad and unfortunate...1984 anyone?
I should add that Scott Fullwiler points out that the Clinton surplus was made possible by the equity bubble. While the surplus may have been justified in terms of sectoral balances by nongovernment dissaving/lavish consumption at the time, MMT'ers pointed out at then that the "boom" was based on Minskyian fragility and was likely to implode, which it did. The proper response would have been regulatory to cool rampant speculation in equities not supported by fundamentals.
ReplyDeleteMario, you can't eat bullets or drive bombs, and fortunately, civilians cannot purchase or even own military hardware — yet.
ReplyDeleteThink of the market potential though. Every teen would want a rocket launcher.
What I meant was that the US spends an enormous amount every year on military purchases, most from US companies. This money flows into the US economy, but none of the product — military hardware ‚ is available for civilian purchase. This adds a whole lot of NFA to the system without corresponding product to purchase. That is very inflationary and the US could not do this on a regular basis without either raising taxes or depressing wages.
got it. thanks man. yeah not a good idea on that rocket launcher!! LOL
ReplyDelete"The proper response would have been regulatory ..."
ReplyDeletelol (gallows humor). that must have been why glass-steagall was repealed in 1999 and the cmfa was passed in 2000.
Financial Regulation Timeline
That's true, selise, but it was as simple as increasing margin requirements.
ReplyDeleteBarney Frank: On the other hand, he [Greenspan] was terribly mistaken, as he finally acknowledged, in his refusal to regulate. When they said to him, "You've got to deal with bubbles," whether it was the dot-com bubble or the housing bubble, his answer was to pose a false choice: "Oh, you want me to deflate the whole economy. I can't do that." Well, I think he was right not to deflate the whole economy, because that would have inflicted a lot of pain on marginal workers. ...
But there was a third choice, which was to regulate. He could have, for instance, during the dot-com bubble, tried by increasing margin requirements to slow down excesses in the stock market. And he certainly could have restricted the issuance of irresponsible subprime mortgages.
Tom,
ReplyDeleteCirca 2004/2005 in the mid-Atlantic, I was working with an architect and lumber prices shot up to where a sheet of plywood went up to like $55 (now $13 at Home Depot last I checked).
My friend was told by the lumber yards that the Iraq reconstruction contractors (KBR, DynCorp, etc..) came in and bought out all the inventory and shipped it to Iraq, causing shortages in our area. (Also the drywall so we bought some radioactive stuff from the Chinese instead).
You would have thought that someone as sharp as Rumsfeld (at least in HIS own mind) would have thought to hire a few economists to recommend a saner acquisition policy that didnt hurt Americans... but Rummy always said "you go to war with the economic staff you have"... ;)
Resp,
Thanks, Tom
ReplyDeletea chunk of the reagan spending was the 300 billion 'spent' on the s and l crisis, back when that was a lot of money.
ReplyDeleteand largely absent from analysis is the contribution of the s and l expansion phase that supported aggregate demand to the tune of maybe $1 trillion. (I get that number by assuming/guessing that if the govt. lost 300 billion and not all the loans went to 0, the gross lending might have been around a trillion.)
www.moslereconomics.com
Mario, Chomsky pointed out a long time ago that the two parties switched their fiscal stance in the 70s-80s. And that since it's a fundamental, important change, it would be little talked about.
ReplyDeleteAll you have to do is ignore that Obama signed the 2009 budget and that spending increased a bunch with (the just one time!) programs of TARP and the Stimulus. Of course, that level of spending is not permanent. I spend $100 the first year, I spend $150 the next year - a big 50% increase, but in subsequent years I spend only $8 more. On a $100 budget, thats an increase of 8% - on a $150 budget, that is an increase of 5% - Same actual increase in expendature but I am a hero at 5% because my baseline is higher.
ReplyDelete