Federal spending doesn’t work

Despite ongoing federal deficits of more than $1 trillion a year, many liberals are calling for more government spending to “create jobs.” At the same time, liberals are opposing budget cuts because that would supposedly hurt the economic recovery. And then there is the perennial problem of Democrats and Republicans defending spending on their particular favored programs.

With all these forces arrayed against budget sanity, it’s time to take a back-to-basics look at the role of government spending in the economy.

Federal spending has soared over the past decade. As a share of gross domestic product, spending grew from 18 percent in 2001 to 24 percent in 2011. The causes of this expansion include the costs of wars, growing entitlement programs, the 2009 stimulus bill and rising spending on discretionary programs such as education.

New projections from the Congressional Budget Office show that without reforms spending will keep rising for decades to come. The CBO’s “alternative fiscal scenario” shows spending growing to 34 percent of GDP by 2035. Thus, the federal government is on course to gobble up almost twice as much of the U.S. economy 24 years from now as it did just a decade ago.

America is becoming a big-government nation

Sadly, America is rapidly becoming a big-government nation. Data from the Organization for Economic Cooperation and Development compares spending by all levels of government among its 31 high-income member countries. This year, government spending in the United States hit 41 percent of GDP, meaning that more than 4 out of every 10 dollars that we produce is consumed by our federal, state and local governments.

We used to have a substantial government size advantage compared to other countries. But Figure 1 shows that while government spending in the United States was about 10 percentage points of GDP smaller than the average OECD country in the past, that gap has now shrunk to just 4 points. A number of high-income nations — such as Australia — now have smaller governments than does the United States.

This is very troubling because America’s strong growth and high living standards were historically built on our relatively small government. The ongoing surge in federal spending is undoing this competitive advantage that we have enjoyed in the world economy.

CBO projections show that federal spending will rise by about 10 percentage points of GDP between now and 2035. If that happens, governments in the United States will be grabbing more than half of everything produced in the nation by that year. That would doom future generations of Americans to unbearable levels of taxation and a stagnant economy with fewer opportunities.

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  • Kurtis D. Davis

    Mr. Edwards, thanks for the article, and an opportunity to share ideas.

    I do not know it all, neither do I have all the answers. But it seems to me that with regards to excessive federal spending, we should first look to Abraham Lincoln.

    “And, inasmuch [as] most good things are produced by labor, it follows that[all] such things of right belong to those whose labor has produced them. But it has so happened in all the ages of the world, that some have labored, and others have, without labor, enjoyed a large proportion of the fruits. This is wrong, and should not continue. To [secure] to each laborer the whole product of his labor, or as nearly as possible, is a most worthy object of any good government.”

    Thus we can discern the shear fallacy of “tax and spend”. Our violation of Mr. Lincoln’s wisdom has surely resulted in a government driven economy, wherein the very elected officials we depend upon are robbing the profit of the laborer, so as to spend such profit in the most frivolous way.

    The problem has become so chronic that as a nation, we are now challenged to circulate a currency which is more than worthless.

    No currency of any nature can maintain value unless kept relatively scarce. If gold bullion were to be plentiful as sand, it would be just a cheap. We must keep our fiat currency closely in sync with the product of our domestic labor force.

    We must realize that the Founders looked back on 180 years of history, so as to describe those conditions which allowed creation of their personal cash fortunes. The description brought about is called THE CONSTITUTION OF THE UNITED STATES OF AMERICA. This most splendid of documents intends freedom/liberty for a private population, that they might create tangible wealth, with associated economy.

    But when we are burdened with trade policy which sells us out to communism, government agencies out of control (EPA-OSHA-etc), and excessive taxation/spending, our creation of tangible wealth is crippled, our economy suffers, and our people moan in despair.

    We see huge amounts of cash put to possession of people who have not, as Mr. Lincoln admonished, done even a single day of honest work. We associate our currency with the most frivolous of things, such as extraordinary salaries for athletes, illegal drugs, nation wide gambling, and etc. In the State of Oklahoma, the football coach is paid over 40 times as much as the governor.

    America is now at a “crossroads”. We either fully embrace Mr. Lincoln’s wisdom, or our currency becomes worthless, with attending consequences.

    Recent history mandates that we now embrace a balanced budget amendment, as the only means of preventing the shear stupidity of deficit spending, with associated national debt. By way of comparison, it will do no good to remove 10,000,000 illegal Mexicans, if the border is left insecure.

    In conclusion, please be reminded that the honorable Tom Coburn, and Speaker Boehner, are offering excellent leadership towards the fiscal discipline this great nation so desperately needs.

  • Gridmark

    Chris, the liberals are spending to create jobs, yes it won’t work, but also more tax cuts (deficits) (republicans) after years of tax cuts will not work, and more printing of money (the fed) will not work either, and the states wants casinos for jobs. Well, none of that is working if you are sending jobs overseas. It is 2 billion cheap laborers in the free market system, it is lean principles and more loss of jobs, it is automation and more loss of jobs, and it is mergers and consolidation and more loss of jobs. Never before, in our lifetimes, have we seen an onslaught on the middle class. But the saintly and economic know hows of the republican party has all the answers. Unless, of course, you want people to be paid a dollar an hour. Maybe it is the New World Order. Is that what it is all about? So far, everyone seems to be clueless or in on the New World Order. All of the stimulus we had is gone. We used up the spending, the tax cuts, and the printing of money and it is not working.

    You and others will talk about exports, of course the fed is printing money to keep the dollar low to export. But the other problem is that we lost 1/3 of our manufacturing. So, how can we export more with less? What will fill in the 57,000 factories that have closed over a decade? What widget can we make here and not some other country? What small business can we have in a community where factories are closed? No one has answered the questions? No one. Now, if we could, could someone come up with some answers? Not one politician has come up with anything and the economists are mostly clueless. About the only ones that make more sense is Tom Friedman or Fareek Zakaria, at least they come up with a different perspective. Until we come up with some different answers, we will either keep going down or we will just muddle through putting more people on government assistance as jobs keep going overseas.

    • Kurtis D. Davis

      Gridmark, let me answer the question. When you have a man who smokes dope and avoids the draft, while 58,000 young men die trying to halt communism, and then elect the dope head as President, so that he sodomizes a woman in the White House, lies to the nation, signs pardons as a convicted felon, AND SELLS OUT MILLIONS OF AMERICAN JOBS TO COMMUNIST VIETNAM, our manufacturing capacity suffers. When “Baby Bush” sells our nation out to 900,000,000 communist Chinese slave laborers, our manufacturing suffers. When Soetoro/Obama fails to translate battlefield victory into political gain, as per treaty with Iraq, and gives America increased homosexual rights instead, we pay $4.00 per gallon, and our economy suffers.

      Perhaps you can help to define the negative trend which seems to be ruining us.