Spending Like a…

Is the federal government spending at a faster rate? Your answer probably has more to do with your biases than with anything else. Most people don’t know the numbers or they imagine some more appropriate past. Below is logged current federal expenditures (this does not include government fixed investment, only consumption. Yes, we can argue about measures. This doesn’t include transfers).

The line of best fit is about 1.6% per quarter or 6.4% per year. Golly! Our spending is rising so fast! But, US federal spending grew relatively slowly in the 90s – maybe due to that fiscal conservative, Bill Clinton. And our federal spending grew even more slowly between 2010 and 2016 – maybe due to that other fiscal conservative, Barack Obama.

But, inflation varied over this period. What about real, inflation adjusted federal spending? See Below.

Logged real federal spending grew at a rate of 0.8% per quarter or about 3.25% per year. That’s about half the rate of growth. Not so bad, maybe, given that average RGDP growth was 3% in the 20th century. But, we should also consider that our population grew. For all we know, there are increasing or decreasing economies of scale. That is, maybe government is doing more with less (or less with more). Again, see below.

The logged real federal spending per capita rose at a rate of 0.56% per quarter, or about 2.25% per year. That’s even slower growth. Most people earn raises in excess of that. Indeed, real spending per person was flat under Clinton. Both Clinton and Obama presided over level and slope changes that slowed the march of government spending growth. All fine and dandy. But, we are a rich people. How much is federal spending rising as a proportion of our domestic income? Below is federal spending as a proportion of GDP.

Over the past 60 years, federal spending on non-investment goods and services has slowly and irregularly composed a greater share of our national income, growing at a rate of about 0.08% points per year. That’s hardly anything. Measured as a share of economy, Ronald Reagan was profligate, raising spending to 24% of GDP in 1982. Similarly, the first couple of Obama years oversaw a spending spike that peaked at 25% of GDP. Both of those periods are dwarfed by the 45% in the 2nd quarter of 2020, of course. But even now at our post-covid federal spending, depending on your preferred measure, government spending is *at or below* the historical trend*. However, federal spending as a fraction of GDP is still in the 90th percentile (dotted line). That’s pretty high, but no crazy-town kind of high.

2 thoughts on “Spending Like a…

  1. Scott Buchanan April 17, 2023 / 9:45 pm

    Interesting data.
    Does it include or exclude transfer payments, such as social security, medicare, etc.? I could not tell from the text. My understanding is that it is those categories, not spending for military or infrastructure, that has shot up in recent decades.


    • Zachary Bartsch April 20, 2023 / 7:29 am

      You are absolutely right. Some macro folks incorrectly say that those transfers don’t matter. But I think that they certainly have incentive effects. They pretty uniformly grow however.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s