Some conservative commentators are like Uncle Theodore, a character in Evelyn Waugh’s comic novel, “Scoop,” who sings “change and decay in all around I see,” as he looks out his window every morning. They are so sure that “fast falls the eventide” on our nation that they really don’t want to spend any time looking at objective reality.
Their frequent theme is the inexorable, mushrooming growth of the federal government. For example, in a recent op-ed, Bloomberg’s Amity Shlaes bemoans federal disaster relief spending as yet another tragic manifestation of government growing out of control.
It would be useful if such observers would spend more time looking at the actual data and less time spinning yarns. Yes, the federal government is growing, as measured by its outlays of money. However, if one compares these to the size of the overall economy, the increases are less dramatic than many claim.
Total federal outlays during the first three fiscal years of the Obama administration averaged 24 percent of Gross Domestic Product, or GDP, which measures the value of all final goods and services produced in our economy. That was an all-time high in peacetime.
It certainly is above the 17.1 percent in the Eisenhower years, 18.1 under Kennedy-Johnson, 19.1 under Nixon-Ford and 19.2 percent in Clinton’s time.
However, it was 21.9 percent over the eight Reagan years and was 22.9 percent in 1982 and 1983, a period of recession less severe than the most recent one. From that to the current 24 percent is not so great a leap. Whether an increase of 1.1 percentage points over three decades really represents out-of-control growth of government is a subjective question readers must decide for themselves, but it doesn’t particularly alarm me.
The more important thing to recognize is that growth in outlays over recent decades has been driven almost entirely by two factors: the aging of the population that is driving up Social Security spending; and increases in health care costs that drive up spending for Medicare, Medicaid and all other federal health programs.
Each year’s Economic Report of the President contains convenient spreadsheet tables with outlays summed into categories. Spending on general government operations is tabulated under the rubric of “other.”
This category excludes defense and foreign relations, interest on the debt, Social Security, all health programs and all “income support” programs from unemployment compensation to housing subsidies.
It includes day-to-day running of all Cabinet departments except Defense and State and virtually all smaller bureaus and commissions, including the Federal Emergency Management Agency and all the domestic civil works of the Corps of Engineers.
As a fraction of GDP, spending on such general operations is well below levels that prevailed from the mid-1960s to the late 1980s. In other words, while the absolute number of dollars spent has increased, it has not grown as fast as the overall economy. Moreover, this is true even though the rate of economic growth since the mid-1970s has been slower than it was in the first 30 years after World War II.
Furthermore, the common idea that our so-called welfare spending is soaring also is far from true. The “Income Security” category of the same report includes food stamps, Temporary Assistance to Needy Families, the federal share of unemployment compensation, Supplemental Security Income, Section 8 and other housing subsidies, and all other nonmedical “transfer payments” that one might think of as welfare.
Again, considering this relative to GDP, the trend since 1975 has been sideways, showing no long-term increase. It rises during recessions and falls during economic expansions. It currently is at exactly the same level, compared with GDP, as it was in 1983, another recession-recovery year. Take either of the two, and one still is below the levels that prevailed in all years from 1975 through 1982.
The number of government employees is another measure of government size. The Chicken Littles of burgeoning government often imply this is growing out of control. Again, they conveniently avoid the facts.
As of October 2012, about 2.8 million civilians worked for the federal government. More than 35 years ago, in January 1967, it also was 2.8 million. But our population then was 197.8 million versus 314.7 million now. As a portion of the labor force, federal employment has fallen by half, from 3.7 percent to 1.8 percent. These numbers include postal workers. Exclude them and the numbers are smaller but follow virtually the same trend.
We have real spending problems that are not sustainable, but not outside of the big entitlement programs that include Social Security and Medicare. These have burgeoned for reasons that we have known of for decades and repeatedly ignored. But, over the same span, general operations have grown slower than the overall economy.
Economist Edward Lotterman teaches and writes in St. Paul, Minn. Write him at ed@edlotterman.com.
