Thursday, January 24, 2013

Do we have a spending problem?

The usual suspects have been passing around a chart they claim shows that we don't:

(clic the pic for an even more bigger image!)

Well, I have to say that it sure looks like a spending problem to me (N.B. I am not a Republican or a "conservative").

Remember that the graph is in per capita terms. Population growth has averaged right around 1% a year over this period, so there's a lot more spending than it seems.

Often it's appropriate to express things in per-capita terms, but government spending is *not* an obvious candidate. First off, much government spending is on public goods, which by virtual of their being non-rival (or partly non-rival) in consumption means that per-captia is a very poor way to express their spending levels. Defense spending per-capita is kind of a weird and meaningless concept. Infrastructure falls in the middle. Eventually population growth would require greater infrastructure spending due to crowding or faster depreciation, but per-capita is just not a completely appropriate way to express it. Entitlement spending might be best expressed per-recipient rather than per-captia.

Another strange thing about the graph is it attributes total spending to the president in office. This is just weird. Yes Bush was a terrible president. Yes we spent like crazy and ran up deficits with nothing to show for it. I get it. I agree with it. But the president doesn't control Federal spending, he only has the veto threat to try and shape congressional decisions. He doesn't have any real direct lever to affect state and local spending at all.

There is simply no reason to expect that real government spending per capita should constantly rise and there is not reason to impute said spending completely to the president in office when it occurred.


Norman said...

In a simple, old Keynesian model, federal + state + local (but not per capita) would be the correct measure for how much of a fiscal stimulus we saw during the recession. The per capita is just weird.

I assume the only purpose of such a graph is to say "Oh yeah? Well your guy Bush was way worse!"

Anonymous said...

Why include state and local spending with public spending. Does the president really control how much my community spends on sidewalks and parks? I can guess why they include state and local spending...because state and local spending might actually be falling, partially offsetting federal spending that has been rising like crazy!

aub said...

Those numbers seemed odd to me - for example, how can we go from a $250B deficit in 2006 to a $1.1T deficit while spending is going down - so I looked around.

According to, we spent $5.94 T in federal, state, and local govt in 2010 (the last year they had actual numbers for state and local). They estimate the population at 308.7 million - giving a per capita of $19,254.

In 2008, we spent $5.33 T with a population of 303.4 million => $17,600 per capita. In 2001, it was $12,025 per capita (which seems to be close to the chart).

I'd like to see the source of these numbers before drawing any conclusions from them, especially any indication that we stopped spending like crazy and running up deficits once Obama came into office.

Anonymous said...

The reason for including state and local government spending is that without it you get a different story. People who want to make this type of argument with just federal spending will often "normalize" it by putting spending as a percentage of potential GDP.