Jon Krajack — Guest Post: Obama a big spender? No way.

Obama, Big Government Spender??

According to the Heritage Foundation (a conservative think-tank), here is inflation-adjusted total U.S. government spending since 1993 in Billions of $$$ (with + or – from the previous year, and a * when government spending decreased from the previous year):

1992: $2,079

CLINTON
1993: $2,123 (+44 billion)
1994: $2,156 (+33 billion)
1995: $2,189 (+33 billion)
1996: $2,211 (+22 billion)
1997: $2,228 (+17 billion)
1998: $2,270 (+42 billion)
1999: $2,308 (+38 billion)
2000: $2,379 (+71 billion)

BUSH
2001: $2,420 (+41 billion)
2002: $2,570 (+150 billion)
2003: $2,705 (+135 billion)
2004: $2,801 (+96 billion)
2005: $2,924 (+123 billion)
2006: $3,038 (+114 billion)
2007: $3,032 (-6 billion)*
2008: $3,239 (+207 billion)

OBAMA
2009: $3,772 (+533 billion)
2010: $3,670 (-102 billion)*
2011: $3,746 (+76 billion)
2012: $3,611 (-135 billion)*
2013: $3,455 (-156 billion)*

Federal Spending by the Numbers, 2013: Government Spending Trends in Graphics, Tables, and Key Points Romina Boccia, Alison Acosta Fraser and Emily Goff

Ok. Let’s take note of some interesting things here:

Obama HAS NOT been a massive government spender. Of course his first year in office there was a huge spike in government spending because the economy was tanking… shedding hundreds of thousands of jobs per month. Both Bush and Obama enacted fiscal stimulus, which is part of the reason why the two biggest year to year jumps were 2007-2008 and 2008-2009.

What’s interesting though is that besides 2009, government spending has been decreasing more than it’s been increasing under Obama.

What about these $1 trillion+ budget deficits?  How could they be so large while government spending has not been increasing?

The budget deficit is a record of government spending relative to tax revenue. When the economy plummeted in 2008-2009, huge numbers of people were laid off work. When this happens, i.e. when less people are earning paychecks, tax revenue to the U.S. Government decreases. Make sense? But also, newly unemployed people apply for unemployment compensation and welfare and Medicaid etc., i.e. they need financial assistance. Make sense? The combination of these two things ~ less tax revenue + increased government spending on social safety nets ~ THAT is why the budget deficits are so high under Obama. This would have occurred no matter who became president because the social safety nets are “automatic stabilizers”…. They kick-in automatically when people lose their jobs. They STABILIZE the economic downturn. That’s what they are supposed to do (as well as not let people starve, etc.).

How can we get Obama to become that big government spender he's accused of being?

Jon Krajack

Edward Harrison — How bond market vigilantes force rates higher

Bottom line: the deficit is mostly an endogenous variable – the result of how existing fiscal policy interacts with private sector savings and consumption decisions. In economic parlance, the deficit is the result of an ex-post accounting identity, not an ex-ante economic variable to target for economic policy. The deficit automatically increases during an economic crisis, as it did after 2009 everywhere in the industrialized world. The deficit also automatically declines when private net savings declines, as it does when an economy recovers from a private sector debt crisis. That’s what’s happening now. In today’s circumstances, it is completely unrealistic to expect high levels of inflation that would force the central bank to raise policy rates. Right now, inflation and inflation expectations are actually decreasing, not just in the US but globally.

Credit Writedowns
How bond market vigilantes force rates higher
Edward Harrison

Marshall Auerback — How the Economic Quacks Promoting Austerity Will Increase the Deficit

The deficit has been falling, but cuts in government investment will only blow it back up.

AlterNet
How the Economic Quacks Promoting Austerity Will Increase the Deficit
Marshall Auerback
(h/t Kevin Fathi via email)