Who is really responsible for the mess we are in? Consider two assertions: 1. Federal spending during the Obama administration has averaged 23.5 percent of gross domestic product, which is well above the post-World War II average of 19.1 percent. 2. Federal spending under Obamas administration has grown at the slowest rate of any since Calvin Coolidge.
Both assertions are correct. But how can that be?
Putting the first in context is easy. The oft-cited 19.1 percent figure hangs largely on lower spending during the Truman and Eisenhower years, both deficit hawks. The average for the 30 years before Obama is 20.5 percent, and that of the free-spending 1980s is 21.8 percent. So the 23.5 percent is not as big a jump as some would have you believe.
Nevertheless, if spending levels are higher, how can growth of spending under Obama be low? The answer is that the big jump in spending took place in fiscal 2009, the last of the George W. Bush administration, in which outlays hit 25.2 percent of GDP. Spending that year was $3,518 billion compared with $3,538 billion for fiscal 2012, which ended four months ago.
Adjusted for even the mild inflation over that period, real spending actually dropped over the first four Obama years.
You may quickly protest But Barack Obama was president in 2009, not Bush! Yes, but a fiscal year starts nearly four months before a new president is inaugurated. And it always takes a while for any new president to get tax or spending changes through Congress and even longer for that to alter either tax revenue or spending.
Didnt Obamas $787 billion stimulus plan pass Congress quickly, however, and didnt it raise spending? Yes. The Congressional Budget Office and the executive branch Office of Management and Budget agree that it added about $260 billion to the 2009 federal deficit. But, just as opponents of the plan pointed out, it takes time for new spending to be implemented. Moreover, about a third of the stimulus was in the form of tax cuts, not spending increases. The tax cuts went into effect faster than the spending, so new Obama spending initiatives accounted for, at most, $140 billion of a deficit that totaled $1,412 billion.
So was Bush the big spender then? No, not really. He had asked Congress for and had gotten his own smaller Economic Stimulus Act of 2008. But since that consisted almost entirely of short-term tax rebates that largely fell into fiscal 2008, it did not increase 2009s spending or deficit.
Yes, his administrations Troubled Asset Relief Program did approve spending $700 billion, mostly to bail out teetering Wall Street firms. And some $300 billion of that went out the door right away. So yes, Bush administration initiatives did contribute to the record outlays and deficits, but only in part.
Moreover, as defenders of Bush will correctly point out, while he properly submitted a proposed budget for that fiscal year, Congress never passed a budget bill. Instead, as has been true ever since, funding was authorized and appropriations made through continuing resolutions by Congress, both houses of which had Democratic majorities in 2008.
So where did the extra spending come from? Well, comparing 2009 outlays with those of the prior fiscal year, which had ended just as Wall Street was melting down, shows some big increases.
Spending on national defense jumped by $45 billion. Social Security payments rose by $65 billion and Medicare by $39 billion. Other health programs, primarily Medicaid and the State Childrens Health Insurance Program, increased by $54 billion. And the income security rubric that includes any other welfare or income transfer programs went up by $103 billion.
Spending in this category rose primarily in two areas, the Supplemental Nutrition Assistance Program, formerly food stamps, and in the federal portion of unemployment compensation. It was not that Congress and the president authorized major new programs, it was that spending on programs set up decades earlier automatically rose sharply as the recession set in.
Fortunately, spending has pretty much been flat since 2009, and the annual deficit for fiscal 2012 was down $324 million from four years earlier. But we are still in a mess. More on who is responsible in a column next week.
Economist Edward Lotterman teaches and writes in St. Paul, Minn. Write him at ed@edlotterman.com.




