Tuesday, June 19, 2012

The myth of out of control government spending

The myth of runaway spending.

Many of you have probably already seen the chart I posted below, but I it's worth another look particularly in light of Mitt Romney's recent comments on "fiscal responsibility."

"The mission to restore America begins with getting our fiscal house in order. President Obama has put our nation on an unsustainable course. Spending is out of control. Yearly deficits are massive. And unless we curb Washington’s appetite for spending, the national debt will grow to the size of our entire economy this year."

The chart shows that spending is clearly not out of control. In fact, it is lower now as a percent of GDP than when Ronald Reagan was in office.  By the way, the Republicans had no problem with Reagan's "out of control" spending.

Look at how government spending collapsed under Clinton. We still haven't recovered from that. And the Clinton surpluses are considered to be so virtuous. It was totally the opposite.


Clonal said...
This comment has been removed by the author.
Clonal said...


It should also be pointed out that the spike you see after July 2007 in Govt spending as a percentage of GDP is not so much because of an increase in Government spending (though there was some of that with the anemic stimulus,) but rather because of the stagnant economy (actually declining GDP) because of the GFC (Great Financial Crisis)

mike norman said...

Good point. It was teh result of automatic stabilizers kicking in when millions of people lost their jobs and income because of the recession.

Tom Hickey said...

Right. Those stabilizers, and SS and Medicare, etc., were put in place after the Great Depression as a result of the great Depression. Absent though, the US would be in worse shape than it was then. And the crazies now want to "shrink government and end the welfare state." No sense of history or understanding of economics.

dave said...

why isnt mitt called out for this shit? we teach our children to tell the truth, and this man, who wants to be commander in chief, lies on a regular basis. i really cannot stand to hear him speak.

Tom Hickey said...

"why isnt mitt called out for this shit? we teach our children to tell the truth, and this man, who wants to be commander in chief, lies on a regular basis."

Well, politicians always lie, but Mitt is particularly bad at disguising it.

Moreover, he sometimes tells the truth in a way that is damaging to him. For example, he is going himself no favor by saying he wont' reveal what he will actually do in certain cases because voters won't like it.

SchittReport said...

Seriously? Who posted this - a socialist? If you guys want to continue on this reckless spending path at less than 25% of GDP you will eventually fall off the edge of a cliff, like these socialist economies listed below. The government cannot make things (incl. healthcare, education, infrastructure etc.) better, it can only make things worse - the government should get out of the way and let free markets work. Ok? Do you guys understand now?

(govt. spending 33.7% of gdp)
(unemployment rate 3.1%):

Many Americans have said the Swiss system should serve as model for the U.S. system, as insurers are required to offer coverage to each citizen without considering their age or medical history, while each citizen is required to purchase health insurance. Popular with the public, it encourages competition and is low on regulations, attributes certainly valued in the United States. Switzerland has the 16th lowest infant mortality rate (4.19) in the world and fourth best life expectancy rate (81.7) in the world.

(govt. spending as % of gdp 40.2%)
(unemployment rate 3.0%):

Norway’s health care system is mostly financed by its government, ensuring affordable doctor’s visits and a yearly cap for patients with mounting medical bills. More unconventional methods of reducing the number patients seeking care have contributed to the efficiency of the system. For example, a major cutback in administering antibiotics resulted in fewer infections and thus fewer deaths caused by the problem. Valuing patient safety is what sets Norway apart from other countries, and now, many are mimicking their methods.

(govt. spending as % of gdp 52.5%)
(unemployment rate 7.8%):

Costs are kept at a minimum for patients who utilize Sweden’s health care system. For example, a relatively small sum of money, about the equivalent of $250, covers a patient’s medications for an entire year — the government covers the rest. A cap on health care fees ensures patients can afford to battle long-term health problems without worrying about being financially crippled. The system has been effective, as Sweden’s life expectancy rate is the fifth best in the world (80.9) and infant mortality rate is the third best in the world (2.75).

JK said...

Nice tongue in cheek SchittReport.

It would be interesting to see a ranking of countries based on government spending as a percentage of GDP (for monetarily sovereign countries… obviously Eurozone countries would skew the results right now)… and compare that to how well those countries are preforming in response to this global recession/depression.

I suspect, at least for industrialized counties, that the countries with higher government spending as a percentage of GDP are doing better.

Any thoughts on where to compile this data from?

mike norman said...

jk: I will try to put that together

mike norman said...

Dave: Obama, too. Why don't his advisers give him this info to defend what he has done? To ask for more stimulus? He's just as guilty, even worse, he's in power.

dave said...

shitreport, what are you a fascist? if wanting singlepayer, a job guarentee, a decent home, a nice retirement, and politicians who dont say whatever you want to hear just to get elected, i guess that makes me a socialist. i agree mike, obama also needs to be held accountable. its a shame we have to watch the comedy channel to get news

Clonal said...

SchittReport post was very tongue in cheek, and sarcastic. I hope that it clarifies things.

Anonymous said...

Yeah, that chart that JK requested would be very interesting to see for comparisons sake.

Potentially good info there.

Bob said...

Out of control spending is not the problem , out of control interest debt payments is the problem for me and the rest of the sheeple, I have to pay for the scum Jamie Dimons and scum Co-opted Politicians, and the Facist corporations who are primary dealers and member banks of the Federal Reserve, and Govt cartel.
Wish I could run up the credit cards and get the sheeple to pay for it.

SchittReport said...

dear dave, for more examples of our fascism - please visit our page on YT.

Anonymous said...

You're payin for it all right ... Not because your taxes are funding it, but by extremely poor policy choices by those who don't understand the economy and it's monetary system. The result is the economy in which you/we collectively reside.

As JPM continues to prove: you can polish a Dimon, but you can't polish a turd.


Clonal said...

Dave, here is a link to SR's YT Channel

Michael Boudreau said...

There looks to be some decent date in this report for OECD countries. Looks like a measure of all govt levels. Specifically, the chart on page 8 caught my attention.

Similar data direct from OECD (Page 34):

Maybe Mike or someone can comment on the reliability of the data. Seems in line with most of what I've seen from trustworthy sources.