Hey, Small Spender (Krugman analyzes Government spending Surge)

[BootinUp]

Hey, Small Spender
One of the things everyone knows right now is that Obama has presided over a huge increase in government spending. But like so many of the things everyone knows, it isn’t true.

A few considerations to bear in mind:

1. You don’t want dollar amounts, especially when comparing over time; you really want to scale spending by the size of the US economy.

2. But even dividing by GDP isn’t quite enough, because we’re still a deeply depressed economy, so government spending as a share of GDP will look high even if actual spending hasn’t risen at all, simply because it’s divided by a smaller number. So a better guide is spending as a share of potential GDP, for which I use the CBO measure.

3. You really want to consolidate federal spending with state and local — especially because a significant part of the stimulus was aid to state and local governments designed to help them limit spending cuts.

So what do the numbers look like when you look at total government spending as a percentage of potential GDP?

http://krugman.blogs.nytimes.com/2010/08/03/hey-small-spender/

[Kdillard]

1. It is a ridiculous charge and I am glad that Krugman is debunking the

Myth.

[n2doc]

2. in a picture

http://krugman.blogs.nytimes.com/2010/10/15/big-spender-update/

And a new update

http://krugman.blogs.nytimes.com/2010/10/16/the-non-surge-in-government-spending-continued/

Put these together, and “normal” growth in government spending would have been 11.7 percent over the past three years.

Actual growth has been higher: 19.5 percent. So government spending is about 7 percent, or about $350 billion, higher than a simple trend projection would have suggested. What accounts for the higher spending?

Well, none of it is government consumption; it’s all in transfer payments. BEA data aren’t quite as helpful here as I’d like, but it’s clear that a large chunk, roughly $100 billion, is unemployment benefits, which have surged along with unemployment, and another large chunk is Medicaid spending, which has surged because the slump has impoverished more people. Some more for other safety net programs, like food stamps. Also, Social Security and Medicare outlays have gone up about $85 billion more than my 11.7 percent norm — medical cost growth, aging baby boomers, and maybe some people taking early retirement because they can’t find jobs.

And with that, you’ve basically explained the growth in government spending. No giant expansion of the welfare state — just business as usual in the face of a horrific slump.

[BootinUp]

3. thanks! nt

[Whisp]

4. K&R. thanks for posting that.

[xchrom]

5. Recommend

[BeFree]

6. And

The only thing keeping the economy from sinking is the government spending.

The private sector is in debt to their eyeballs. They can barely spare a dime.

Obama really did win a major battle by passing the increased spending program, but for some reason we don't want to talk about it.

Had Obama lost we'd all be underwater, just like in the 1930's. Be proud lefties.