Wednesday, February 15, 2006

The era of big government is back

Clinton famously declaimed, "The era of big government is over." Then Bush came into office and changed all that. The annual growth in total government spending under the five most recent presidents is given in the following table:
PresidentGrowth per year
Bush II, 1st term4.6%
Bush I1.9%
As you can see, the federal government has grown much faster under Bush II than any other recent president.

Bush's 4.6% increase in spending (after adjusting for inflation) may not seem all that large, but remember that that is per year. Spending grew by 19.7% over his first term. Furthermore, the Bush Administration is predicting that government spending will increase by 6% this year. (All the data in this article comes from the historical data tables of Bush's 2007 budget proposal.) If that prediction turns out to be correct, Bush's five year average will be 4.9%.

Right wingers sometimes argue that cutting taxes doesn't increase the deficit because if taxes are higher, the government will just spend more. The table above shows that this is nonsense. The presidents who were fiscally responsible enough to raise taxes in order to cut the deficit presided over the lowest spending growth. The highest growth in spending occurred under presidents who passed irresponsible tax cuts.

We've seen that Bush and Congress have spent a lot of money during Bush's first term. What have they spent it on? The answer is, just about everything. Here is a table showing the changes to the federal budget spending by function, in constant (inflation adjusted) dollars:

National defense297.9436.6138.646.5%
Education, training, employment, and social svcs.55.886.030.153.9%
Income security263.6304.841.215.6%
Social security (On-budget)11.414.63.127.4%
Veterans benefits and services44.061.817.840.5%
Natural resources and environment25.024.7-.3-1.4%
Commerce and housing credit (On-budget)
Community and regional development11.523.111.6101.2%
Net interest (On-budget)268.7243.1-25.6-9.5%
International affairs16.130.514.489.2%
General science, space and technology19.320.91.57.9%
Administration of justice29.535.35.819.5%
General government13.915.01.07.5%
Undistributed offsetting receipts (On-budget)-38.2-47.8-9.625.2%
Total, On budget federal outlays1481.81824.4342.623.1%
Social security (Off-budget)411.7446.735.08.5%
Postal service (Off-budget)2.2-1.6-3.8-170.2%
Net interest (Off-budget)-67.2-80.9-13.720.4%
Undistributed offsetting receipts (Off-budget)-7.7-9.6-1.924.8%
Total, Off budget federal outlays338.9354.515.64.6%
Total, Federal outlays1820.82178.9358.219.7%

In looking at these numbers, we can use the Clinton spending growth rate of 6.2% over four years as a base line. In any category where spending increased less than 6.2%, we can say spending was restrained.

Starting at the bottom of the chart, we see that off budget spending grew by only 4.6%. This category includes Social Security benefits and the Post Office. The off budget net interest is mostly interest earned by investing the money in the Social Security trust fund; this is a negative number in the chart because it is income rather than an expense.

The reason that off budget spending grew slowly is that Bush hasn't done anything to these programs. He wanted to change Social Security, but left that project for his second term.

In the on-budget spending, we can ignore two categories. "Community and regional development," which doubled, is dominated by disaster relief spending. The "Agriculture" category, where spending declined, is dominated by price supports. The spending in both these categories varies all over the map, depending on events.

That leaves us with two categories where spending decreased, the first being net interest. That declined because interest rates have fallen. The total debt increased by 23.6%. If Bush had balanced the budget, like he said he would do during the 2000 campaign, the debt would have decreased by 9.8% due to inflation. The bottom line is that Bush did all he could to increase net interest payments.

That leaves one category where Bush has cut spending: Natural resources and environment. Mostly, this is due to a 21.1% cut in conservation and land management. He also decreased pollution control and abatement by 3.64%, and spending on water resources by 1.5%. He increased spending on "recreational resources" by 16.4% and spending on "other natural resources" (which I assume goes mostly to business interests) by 33%.

The bottom line is that Bush's hostility towards protecting the envronment is reflected in the budget, but in every other category he has been a big spender. Of course he didn't do this alone--the Republican congress also played a role. The myth that the Republican party is the party of smaller government is just that: a myth.

For those who like numbers, here is a table of federal spending since 1960. A few notes:

  • The year is the fiscal year. Currently, the fiscal year is three months earlier than the calendar year (e.g. fiscal 2001 began on October 1, 2000). Prior to fiscal 1977, the fiscal year was six months earlier than the calendar year. Because the start of the fiscal year was change in 1976, the third quarter of calendar year 1976 doesn't fall into any fiscal year. The data for that quarter are labelled "TQ" in the table.

  • The dollar figures are in billions of of fiscal year 2000 dollars, meaning that they are adjusted for inflation.

  • This table includes all federal revenues and spending, including money which is classified as off budget. Money which is put into a trust fund is not included in the outlay column until the money is actually spent.

  • The "surplus" column lists the difference between receipts and outlays; it is negative in most years because the government usually runs a deficit. Starting in the 1980's, large amounts of money have been placed into the Social Security trust fund in order to cover the costs when the baby boomers retire. The Social Security taxes used to raise the money going into the fund are included in the "receipts" column, but the payments into the fund are not included in the "outlays" column. For that reason, subtracting outlays from receipts is like subtracting apples from oranges; the difference isn't very meaningful.

  • The "president" column specifies who was president at the start of the fiscal year. Generally when presidents come into office, they stick with the previous president's budget for the current fiscal year (which began when the previous president was in office), and put their proposals into the budget for the next fiscal year.

  • The last column is the year over year increase in constant dollar outlays.

  • As I write this, the 2006 fiscal year is less than half over. The values for 2006 are estimates.

YearConstant dollarsPercentage of GDPSpending
ReceiptsOutlayssurplusReceiptsOutlayssurplus  Presidentgrowth
20061951.12312.3-361.317.520.8-3.2Bush II6.1% 
20051898.32178.9-280.617.520.1-2.6Bush II4.3% 
20041712.52088.3-375.916.319.9-3.6Bush II3.4% 
20031667.02020.1-353.116.520.0-3.5Bush II4.7% 
20021777.81929.2-151.317.919.4-1.5Bush II6.0% 
19931323.21615.5-292.317.621.4-3.9Bush I-0.5% 
19921282.71623.9-341.217.522.1-4.7Bush I0.9% 
19911282.61609.9-327.317.822.3-4.5Bush I1.3% 
19901309.41589.9-280.418.021.8-3.9Bush I6.1%