- Cafe Hayek - http://cafehayek.com -

Hey, Big Spender

Tweet [1]

Here’s a letter to the New York Times:

Paul Krugman says that the reason unemployment remains high is that “There never was a big expansion of government spending” during the current economic slump (“Hey, Small Spender [2],” Oct. 11).  More specifically, he alleges that increased spending at the federal level was “modest” while spending cuts by state and local governments were “drastic.”

Not so.  Inflation-adjusted spending at the federal level rose 29 percent between 2007 and 2009.  The White House Office of Management & Budget estimates that this spending will rise another six percent in 2010 and three percent in 2011 – meaning that, since 2007, Uncle Sam’s spending is on course to rise by nearly 40 percent over the course of a mere four years.*

As for state and local governments, here’s the headline of a July 14, 2010 news release from the U.S. Census Bureau [3]: “State and Local Government Spending Increases by 6.5 Percent in 2008.”  Careful estimates of such spending for 2009 and 2010 show that it will rise even further [4]. [I’m unsure why, in October 2010, it’s difficult to get solid data on actual state and local government spending for 2009.]

Mr. Krugman alleges that the belief that government is growing too fast is the result of “fact-free assertions and cooked numbers.”  Well, I offer here real facts, and leave it to your readers to judge who is doing the cooking.

Donald J. Boudreaux

* See Section 1 of this OMB document. [5]

Jim Agresti, at JustFacts [6], reports the following to me by e-mail:

I ran the BEA’s numbers for federal, state, and local spending (http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=86&Freq=Qtr&FirstYear=2008&LastYear=2010) on 6-29-10:

Governments at all levels spent 4.1 trillion in 2006, 4.4 trillion in 2007 (when this recession began), 4.7 trillion in 2008, 5.0 trillion in 2009, and were on track to spend 5.2 trillion in 2010. This equates to 27% growth over a period in which we’ve had 8% inflation.

More evidence against Krugman’s strange myth of government frugality is provided in yesterday’s Wall Street Journal [7].