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Saturday, February 02, 2008

The Myth of Runaway Federal Spending under Bush

Paul Krugman issues a useful reminder:

Federal spending mythology, by Paul Krugman: One thing I’ve written about a number of times, but becomes especially worth emphasizing now that John McCain is the presumptive Republican nominee, is the myth of runaway federal spending under the Bush administration. McCain has said on a number of occasions that he doesn’t know much about economics — although, straight-talker that he is, he has also denied having ever said such a thing. But one thing he thinks he knows is that the Bush administration has been spending like a drunken sailor. Has it?

Consider the actual record of spending. Never mind dollar figures, which grow because of inflation, population growth, and other normal factors. A better guide is spending as a percentage of GDP. And this has increased, from 18.5% in fiscal 2001 to 20% in fiscal 2007.

But where did that increase come from? Three words: defense, Medicare, Medicaid. That’s the whole story. Defense up from 3 to 4% of GDP; Medicare and Medicaid up from 3.4% to 4.6%, partially offset by increased payments for Part B and stuff. Aside from that, there’s been no major movement.

Behind these increases are the obvious things: the war McCain wants to fight for the next century, the general issue of excess cost growth in health care, and the prescription drug benefit.

So the next time Mr. McCain or anyone else promises to rein in runaway spending, they should be asked which of these things they intend to reverse. Are they talking about pulling out of Iraq? Denying seniors the latest medical treatments? Canceling the drug benefit? If not, what are they talking about?

Here are a two charts using data from the CBO to illustrate these points. The first is for all data available, i.e. for 1962-2007, the second for 2001-2007. These aren't all the categories of federal spending, but they cover all the major categories, and all the categories mentioned above:



    Posted by on Saturday, February 2, 2008 at 12:35 PM in Budget Deficit, Economics, Politics | Permalink  TrackBack (1)  Comments (20)


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