Budget and Economic Outlook

I think, based on this, that people have valid concerns about a permanent expansion in the size and scope of government. It seems reasonable that some of the spending that we are currently embarking on will likley be permanent.

Source: Congressional Budget Office
Via Greg Mankiw

FILED UNDER: Economics and Business, Government, , , , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. It seems reasonable that some of the spending that we are currently embarking on will likley be permanent.

    Replacing “spending” with “deficits” doesn’t alter the basic truths presented in this graph.

  2. I know I am wasting my time… but here goes.

    The CBO is not making predictions. It is making projections based on existing law within a variety of artificial constraints… which is why, as CBO’s own website points out that within just five years historically, their projections of, say deficits, can vary by +/-4% of GDP. In order to get 90% confidence on a CBO projection, you need to create a target equivalent to 8% of GDP. That is a massive error range in just five year… but it is perfectly predictable if you look at the methods they are required to use.

    Ultimately, you can’t have a massive expansion in the size of the federal government without some significant expansion in government programs. The one place you might get that is in health care… We’ll see. I doubt we’re going to see anything more than a cyclical return to something like the size of the government as it was in the early Reagan years, somewhere around 21-22% of GDP. That’s higher than historical norms by about 10% of the budget or 2% of GDP. So my prediction based on my assessment of what is possible politically, etc, is that we’re going to see a 10% increase in the size of government. But there is nothing necessarily permanent about it. Reagan initiated a 20 year period of declining government. These things go in cycles.

  3. Replacing “spending” with “deficits” doesn’t alter the basic truths presented in this graph.

    Only as long as Republicans continue to value cutting taxes over balancing the budget…

  4. odograph says:

    So, you would have looked at a chart of WWII military spending and projected permanent world war?

  5. Mr. Finel, I’ll put money on never seeing the federal share of GDP under 24% the next four years, much less the 21-22% you cite as the historical norm. Somehow, I think I’ll be putting a lot of money on that and not by choice, but I digress.

    Since Republicans haven’t controlled Congress since 2006 and no longer have the White House I’m not sure what the point of your criticism of their preference for cutting taxes over balancing the budget is supposed to be. But please, do tell how Democrats value balancing the budget over spending that would make a drunken sailor blush.

  6. odograph says:

    Charles, the Tea Party Thing is to make predictions like that, without any reference to an ongoing global economic contraction. It is to pretend that chart shows the effects of a Democrat’s election.

    The world economy – A glimmer of hope?

    Why would I take the bet that in 4 years we would have paid off the extraordinary costs associated with this kind of “100 year” event?

  7. Extraordinary? 100 year event? How old are you? The Carter years were much worse than what we are dealing with now — unless the current administration and Congress keep acting as though they are trying to make things worse.

  8. Steve Verdon says:

    The CBO is not making predictions. It is making projections….

    Yes Bernard, read the tags to this post.

    Odograph,

    So, you would have looked at a chart of WWII military spending and projected permanent world war?

    Perhaps you should consult your dictionary on the definition of “some”.

  9. odograph says:

    Well, if it’s only “some” never mind then ;-), as long as “some other” goes away.

    (I expect, for instance, that the Air Force will always be with us. Sadly also the Smithsonian and the National Galleries.)

  10. But you are using the “projection” to support your “prediction” about the growth of the federal government. Indeed, it is your only support. There is no additional analysis of what programs might be expanded, which coalitions might support it, electoral dynamics that might mitigate it, etc. In short, you are using the CBO graph as if it were a convincing piece of evidence in support of your claim about a permanent expansion in the federal government, when it just isn’t.

    So, there are three possibilities:

    (1) You don’t understand the difference between a CBO projection and a political prediction.

    (2) You don’t care about the difference because you are a dishonest hack.

    or

    (3) You’re lazy.

    I think it is (3). Your posts are not meant to convince or inform or provoke debate. They are just excuses to vent your spleen about the results of the last election and get the teabaggers riled up.

    Now, you’re free to do that, of course. But until you guys choose to ban me from commenting, I am also free to point out the content-free nature of most of your arguments.

  11. Since Republicans haven’t controlled Congress since 2006 and no longer have the White House I’m not sure what the point of your criticism of their preference for cutting taxes over balancing the budget is supposed to be.

    Because dems don’t want a repeat of 1994… which is why there were $350 billion in tax cuts in the stimulus package and why Obama has made an insane commitment never to raise income taxes on 95% of the population. As long as the GOP is unwilling to compromise at all on this, the unfortunate result is that it empowers every last crazy member of the Dem caucus — since they can’t count on ANY GOP votes, they often need EVERY democratic vote… including Blue Dogs… including DINOs, etc.

    You need a bipartisan coalition and cooperation to balance the budget, but the absolutist position of the GOP makes that hard to accomplish.

    Dems are also to blame… no question about it… But even without Obama’s desire to increase some programs, we can’t even pay for the programs that are, essentially politically untouchable — defense, medicare, medicaid, social security, interest on the debt. And while Obama’s budget is irresponsible and dangerous, the fact that the budget was so out of balance in the Bush years demonstrates the structural problem that we have due to the GOP tax preferences.

    I agree, there is plenty of blame to go around… but again, even if the Dems completely rolled over — as during the Bush years — we’d still have a deficit because of tax policy.

  12. Steve Verdon says:

    Bernard,

    As for the analysis, I think the work by Robert Higgs is pretty good. Also, this post by Greg Mankiw. Or this one by Prof. Mankiw.

    If you’d like more, here is another, the War on Drugs. I think that a careful analysis would find that the “crisis” due to drugs has been a source that has increased both the size and scope of the government. SWAT raids on non-violent offenders, SWAT units serving warrants, the DEA, stupid legislation regarding psuedophedrine, etc.

    I’ll also add that I don’t see this as a partisan issue since both political parties will enjoy the larger government put in place by preceeding administrations and Congresses.

    I’ve outlined the overall view I have of government and how it works in a number of other posts here. I apologize that I didn’t link all of them for you, but then I guess you didn’t make use of the search function on this site which is actually pretty good, I’ve found.

    By the way, here is a related post that builds off of the the ideas found in the research by Higgs and noted by Mankiw. Oh and looky, you commented in that post too.

    In short, this has been a running theme with me and a number of my recent posts and/or comments.

  13. Teabagging was actually funny the first fifty or so times I heard it. Now it is nothing but a gratuitous insult that gets in the way of any serious discussion. Is it necessary to be so casually rude?

  14. anjin-san says:

    If you’d like more, here is another, the War on Drugs. I think that a careful analysis would find that the “crisis” due to drugs has been a source that has increased both the size and scope of the government. SWAT raids on non-violent offenders, SWAT units serving warrants, the DEA, stupid legislation regarding psuedophedrine, etc.

    The ONE thing left and right seem to agree on is that the war on drugs is a train wreck that harms society more than the drugs do…

  15. Steve Verdon says:

    I’d also add that I think Bernard is once again being a bit deceptive in his comments. What the graph above shows is that for those who favor smallr/more limited government based on the policies in place and the economic projections made by the CBO and assuming these obtain, then federal government spending will likely be larger than it has historically been by about 20%. Further the Democrats seem fine with this as they either crafted the policies that result in this change or they voted in favor of it.

    Now, based on that to say that there are, for those concerned about the size and scope of government, valid reasons for their concerns as seen by the graph is not that shocking. Note also that by saying such concerns are valid/reasonable does not imply that the above projections will have to come true. Bernard is ranting on about what really amounts to a rather petty point, IMO.

    The ONE thing left and right seem to agree on is that the war on drugs is a train wreck that harms society more than the drugs do…

    Actually I’d disagree with your final conclusion. Both Right and Left agree, but it is that we need to prosecute the WoD and both seem fine with the slow and gradual erosion of rights that such a war entails…well at least for the policitians, and voters on the Right and Left vote for them.