What’s the Reich Benchmark?

by Don Boudreaux on June 6, 2012

in Budget Issues, Current Affairs, Data, Myths and Fallacies, Stimulus, The Economy

Here’s a letter to the Huffington Post; (HT Chris Bray):

Robert Reich writes that “government spending as a portion of GDP keeps dropping” (“The Big-Lie Coup d’Etat,” June 5).

Perspective is vital.  Total government spending in the U.S., as a percent of GDP, in 2012 is indeed projected to be down by three percentage points from its recent high in 2009 (a drop to 40 percent from 43 percent).  But this fall is largely an artifact of the colossal spending spike in 2009, when – as a percent of GDP – total government spending in the U.S rose from 37 percent in 2008 to 43 percent one year later.  Total government spending in 2012, at 40 percent of GDP, remains 2.4 percentage points higher than its annual average for the ten-year period 2003-2012 and, significantly, 5.6 percentage points higher than its annual average for the ten-year period (1999-2008) leading up to the start of the current slump.*

Mr. Reich’s suggestion that the recent dip in government spending reflects austerity makes no more sense than suggesting, say, that a man whose weight suddenly ballooned from 260 to 300 pounds is, with his weight now down to 290 pounds, dangerously skinny.

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

* Data calculated from this site.

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