Pretty Pictures on the Federal Budget

A couple years back, I posted an ill-tempered screed in response to an Andrew Sullivan rant about the federal budget, using the invaluable Historical Tables document emitted yearly by the Office of Management and Budget of Your Federal Government. They released this year's budget documents today, and what better time than to recycle that post? I'll eliminate the references to Sullivan (which you can read, if you want, in the old post), and update the data and my opinions appropriately.

I looked at Table 1.2, which contains total budget receipts and outlays as percent of GDP back to 1930. Here's a graph of that data since 1977; post-2006 numbers are estimates:

[Federal In and Out]

Here's what that works out to in terms of deficit spending:

[Federal Deficit]

Click on the graphs for their fullsize versions. Data is here and my Gnuplot script is here. If you'd like to see the data extended back to 1930: here's the receipt/outlays graph and here's the deficit graph.

Note that, as befits a total non-economist, this is about the most simple-minded thing I could have possibly done. But the percent-of-GDP seems appropriate for historical comparison; it seems to be (arguably) a good measure of what we can "afford"; and, if you believe deficits "damage the economy", then it's a pretty good proxy for the level of damage.

Here's some stuff I noticed:

  • The overall trend in federal spending (by this measure), despite bumps, seems to be downward since 1983. Sure, spending increased a lot under Dubya. But (again, by this measure) not totally out of historical whack.

  • On the receipts side, despite fairly wide swings, the trend seems to be pretty flat over this period, somewhere around 18%.

  • Nostalgic for the late Clinton years? Only if you really think it's a good idea for the Feds to be taking a record cut out of the peacetime economy: 20.9% of GDP in FY2000.

  • People who bemoan the savage, nasty, brutal Bush tax cuts? Well, sort of: receipts declined from the high FY2000 level to 16.3% of GDP in FY2004, a level not seen since 1959. But (on the other hand), that was pretty short-lived. Two years later, things were back to a roughly "normal" level.

  • It's (similarly) hard to get apocolyptically excited about recent ups and down in the deficit; the 20-year trend is mostly downward.

  • As a mostly-libertarian, I'd like to think that both receipts and outlays could and should be much, much, lower. But we're talking here about reality and historical context.

  • Entitlements are a ticking time-bomb for the long term, of course.

But my main point is the same as it was in 2005: Look at the graphs, and ask yourself: where do you want the lines to go? What percent of GDP do you think the Feds should be spending in (say) 2030? Let's ignore, for now, the issue of what they should spend on: entitlements, defense, edyookation, … Fight about how to cut the pie after we decide how big it is. Similarly, ignore the issue of where the money comes from; we can also debate that after it's decided what the target is.

That's a simple question, but it's not simplistic. I'd rather this "simple" question got debated openly before anything else; once we've figured that one, we can tackle the "sophisticated" ones. Why aren't presidential candidates being asked such questions?

Last Modified 2012-10-19 3:11 PM EST