I've been thinking a bit about the debate over the budget in Wisconsin in particular and the more general debate about taxes and the size of government. I responded a bit to Paul Soglin's suggestion that we treat government like a business and "invest." I should not think his friends at AFSME would want to go there.
I do not consider myself a business person. I just turned a pretty sweet job at a great company into a consulting gig because my heart and mind laid elsewhere. But I did spend almost ten years as part of senior management, dealing with business issues at more general, "high perspective" level.
And I learned a lot. The business people that I worked with were whip smart. They know their stuff and have the bottom line to prove it.
One of the things I learned is that we do not assume that our costs must go up. In fact, we work very hard to reduce them. When business is down and we don't have the revenue that we used to have, we don't call our customers and tell them that they must dig deeper. We compare our costs to industry benchmarks and, if they are higher than our competitors, we try to address that.
The debate around taxes and government spending is often reduced to one side claiming that government ("the beast") is being starved while the other suggests that the beast is still feeding. Who's right?
Last night I saw some interesting numbers in an essay by William Voegeli in the Claremont Review of Books (sorry, it's only available on processed pulp). He points out that, in the period from 1956 to 1981, real (adjusted for inflation) per capita spending increased 94%.
Did Reagan reverse that trend? No. Did he stop it? No. From 1981 through 2006, real per capita federal spending increased 41%. He slowed it.
Is this more recent spending largely in the area of defense? It looks like it isn't. As a percentage of the budget and gross domestic product, military spending increased until 1987 and then decreased until 2001. Today, it is 20% of the federal budget and 4% of GDP. Both figures are lower than at any point in the Carter administration.
If you want to put this in the best light for conservatives, you could point out that federal spending as a percentage of GDP was 22.2% of GDP in 1081 and 20.3% in 2006. Spending at all levels of government was 31.6% in 1981 and 31.8% in 2006. So the best that the right can claim is that it has fought the Beast to a draw.
So let's keep things in perspective when we hear the words "slash," "starve" and "decimate" in connection with our budget debates.
Serious "cost-reduction" thoughts in Gummint?
ReplyDeleteNever.
Not in Wisconsin, not with the Feds.
Long-term "interests of the polity" thinking hasn't been present since roughly 1960, although the steepest decline has occurred since 1980 or so.
A State or Federal bankruptcy will not occur until today's pols are six feet under and their pensions have been paid in full....
How much did the GDP go up in the same time would help to tell us how much goverment spending went up...and did it go up more than personal incomes at the same time?
ReplyDeleteI'd also be interested in seeing 1981-2006 broken down not as a 25-year period but by presidents. I thought I recalled Clinton slowed growth as much or more than Reagan.
ReplyDeleteWell, heck this is the internet, right? Let me see . . .
Here's a USA Today analysis (graph included!) that shows spending as a percent of GDP. Clinton has the biggest negative number; GW Bush the biggest postive, excluding FDR.
Food for thought.
Just to add to what Jay wrote, this document (pp. 45-52) lists federal spending relative to GDP for every year since 1940. The average for the Reagan years was 22.4 percent, peaking at 23.5 percent in 1983 (the highest level since WWII). The average for the Clinton years was 19.9 percent.
ReplyDeleteVoegeli makes the point, which I alluded to, that federal spending as a percentage of GDP has remained within a band of roughly 19 to 23%. Thus the suggestion that conservatives have fought a draw. Of course, there is no law of nature that says that government ought to get a certain percentage of GDP.
ReplyDeleteAs for the partisan point, it's interesting but unrelated to anything I wrote. My heroes tend not to be politicians. I agree that Clinton did not do much to increase spending. He did preside over a period of reduced military spending while Reagan increased it, but I'll accept the end of the Cold War as a good investment. Clinto may have wanted to increae spending, but he couldn't. I agree that Bush 43 hasn't done a good job of restraining it, although he made a noble effort at social security reform which the Democrats buried. We'll be really proud of that in twenty years.
The only time federal outlays took more than 21.7 percent of GDP since 1946 was under Reagan, and that includes the Korean War and Vietnam War years when the Cold War was a lot hotter than the mid-80s. So, the percentage actually fluctuated between 19-21.7 percent -- until Reagan took office.
ReplyDeleteYou make the claim that Reagan slowed national spending. That's clearly not true.
But, actually, I don't blame Reagan for spending the money. I don't see any evidence that it was necessary to end the Cold War -- Gorbachev's reforms were already doing that, and defense spending didn't hit its peak until 1987 when the end of the Cold War was already imminent -- but it did help to drive much of the nation's economy in the 1980s. Of course, I wish more would've been spent on troops and base maintence rather than defense contractors -- which bred its own problems of waste and excess leading to the relatively useless Packard Commission -- but it was nice to see Reagan embrace the notion that the government can spur economic growth, even if his rhetoric said otherwise.
Umnnnhhh....Reagan was saddled with a Dem Congress, making vetoes less-than-useful.
ReplyDeleteAnd your claim that Gorby was responsible for the end of the Cold War is...unique...
Clinton, on the other hand, had a Republican Congress for the majority of his terms--so let's not try to canonize him for "his" restraint.
After all, reducing military and intelligence does have a cost (does 9/11 ring a bell??)
Umnnnhhh....Reagan was saddled with a Dem Congress, making vetoes less-than-useful.
ReplyDeleteThe Dems never held veto-proof majorities in the House during Reagan's term, and the GOP controlled the Senate until 1986. And is your argument that it was really the Dems who increased military spending and decreased domestic spending in the 1980s?
And your claim that Gorby was responsible for the end of the Cold War is...unique...
Perestroika and glasnost are unique ideas when discussing the end of the Cold War?
Clinton, on the other hand, had a Republican Congress for the majority of his terms--so let's not try to canonize him for "his" restraint.
After all, reducing military and intelligence does have a cost (does 9/11 ring a bell??)
Oh, right, the good restraint was all the GOP, but the bad restraint was all Clinton.
And your apparent argument that funneling more money into defense contracts for major weaponry like B-2 and B-1 bombers, nuclear submarines, etc. -- which was the crux of Reagan's defense spending that the Clinton administration reduced -- somehow would've prevented the attacks on Sept. 11 is...umnnnhhh...unique....
You make the claim that Reagan slowed national spending. That's clearly not true.
ReplyDeleteWhere? I think I was saying that no one has. Reagan increased defense spending and, yeah, I think that and it's internal contradictions put socialism in the dustbin of history. He tried to solve the social security problem but someone figured out how to pick that old lock box. Bush tried to return to it in 2005 but the Democrats shamelessly demagogued him on the issue. That will come back to haunt us.
My comment was in reference to this:
ReplyDeleteLast night I saw some interesting numbers in an essay by William Voegeli in the Claremont Review of Books (sorry, it's only available on processed pulp). He points out that, in the period from 1956 to 1981, real (adjusted for inflation) per capita spending increased 94%.
Did Reagan reverse that trend? No. Did he stop it? No. From 1981 through 2006, real per capita federal spending increased 41%. He slowed it.
Viewed in that way, he did slow the growth although he did not roll back government as a percentage of GDP. I think I was clear on both numbers. Either way, the point is that the government has continued to get larger in real terms if not as percentage of GDP. And, as a percentage of GDP, it's held it's own. Do you disagree?
ReplyDeleteI believe that average personal income is down relative to the GDP meaning we pay more taxes. Isn't that what this is all about?
ReplyDeleteI do disagree, Rick. I think Reagan had little to nothing to do with the slowed real per capita federal spending between 1981 and 2006; I think that most of the slowing came during the Clinton administration. As for outlays to GDP, the fact is the figure never rose over 21.7 percent except for under Reagan, who took it as high as 23.5 percent (which has as much to do with an increase in net interest payments as it did defense spending). Heck, Reagan's average was 0.7 percent higher than any other year since 1946.
ReplyDeleteConsidering Reagan has a mythic reputation on the right as a thrifty spender, which is a point that's actively used as a political tool today, I'd say that these figures are significant.