Government Spending (post #3 of 3)

We Are What We Spend

The three charts shown below demonstrate the growth of government in rather dramatic fashion. Most critically I believe the spending charts vividly demonstrate the immense size and power of government. In a series of earlier posts titled, “Government Etiology” and “Government Regulation”, respectively I briefly described my observations of government versus the private sector. 

From these earlier posts, “I posit that when government achieves a critical mass, which I suggest happened in the 1930’s in the US, it then becomes a self-sufficient organism that does not exist to adjudicate private relations but to ensure its own survival, growth and reproduction. There is the illusion of regulating private relations but it is a chimera to hide the survival mechanism of the governmental organism.

This first chart depicts the combined spending of Federal, State and Local governments. That today’s combined spending levels, as a percentage of GDP, are rapidly approaching the peak levels achieved in WWII should be ringing alarm bells loudly enough to damage our hearing. Incredibly, government, at all levels continues to insist it is underfunded

Federal State and Local Spending

Note the sharp rise in combined spending beginning in the early 1930’s. This level of spending never declined to the pre-1930’s level again but became a base upon which all future spending growth has been multiplied. Post WWII spending never again was as low as that in the mid 1930’s and early 1940’s. There are clear periods of level spending (e.g., spending rising in concert with GDP) such as the post Korean war period through the late 1960’s, the 1980’s and a gentle decline in the 1990’s as a peace time economy combined with a technological revolution and a divided government controlled its innate spending impulse. 

This next chart shows just the Federal government spending. Some blogs have compared this level of spending (again, spending as a percentage of GDP) to that of other nations. Norway, as an example, has double this level of federal spending. While I do not know what the level of “state and local” spending is in Norway or elsewhere, frankly, I don’t care much. They are may do as they see fit. My worry is with the United States. This level of government intrusion and control is a clear threat to our Representative Democracy and market oriented economy. Still, this chart suggests federal spending has not been the prime force behind the combined government spending levels. Although the sharp rise in 2008-2010 is threatening that more benign outlook. Question: does this chart tell the whole truth? I say, “no” it doesn’t. While direct federal spending may not be egregious one must also consider the effect of indirect spending where the federal government mandates spending by state and local governments. After all, we only have one private sector. We must therefore consider the combined government spending not its interwoven parts.

Federal Spending as a Percent of GDP

 Again, from my earlier set of posts I noted, “I regret my repetition but I don’t see government as intertwined with the private economy any longer.  It may have been at one time and indeed, surely was. Government was originally designed (in the US) to buttress and support the private economy and hence private relations. It no longer is the support but the controlling master abusing the power of law to effectively blackmail various (and shifting) sectors of the private economy to gain the financial support to continue its growth and ensure its survival.” When government controls $1 out of every $5 government is in control.

It is an arguable proposition whether government (federal, state and local combined) at roughly 45% of GDP has only just now attained a critical mass or if it was achieved at 33% or 25%. I do not believe it is arguable whether our combined government forces have now in fact achieved that critical mass. And, having done so that government is now an independent, self-sufficient organism engaged in territorial conflict with the private sector. The tail is not only wagging the dog but beating it as well. 

Observing the chart of State and Local spending one sees a curious anomaly: spending declined precipitously from the 1930 level to the mid 1940’s. And from the early 1930’s peak the decline is even more significant. However, it rapidly regained its footing and has climbed ever upward since to the point that State and Local spending is now at levels equivalent to that of the Federal government. 

This chart suggests that a large part of the growth in overall government spending is not due to massive growth of the federal government but to state and local governments. I believe this is true on the top level but that underneath one might observe that this is the outcome of federal mandates pushed down onto the states and localities. The largest such mandate is for Medicaid spending. It is arguable whether a federal mandate that forces state and local government spending is any different from federal spending in the first place. 

State and Local Spending as a Percent of GDP

I believe these charts show that government has clearly achieved a critical mass and now qualifies as an independent organism that is in conflict with, as opposed to being a supporter of the private sector.

In that vein I also noted that, “Government will continue to craft rules and regulators will continue to enforce the rules. It cannot be “smart” as … suggest[ed] for the simple reason that today government is akin to any physical organism. It will grow (tax, regulate) to survive and thrive. Government has no interest in innovation only its own survival and gain. Asking government to simplify itself is like asking a human to eat less. Might be helpful, beneficial even, but not going to happen. Force is required. Not necessarily physical force. It could be force by ballot or by quiet revolution. But force it must be.

Coda:

A friend noted the source of my data for this post. He indicated that the data, due to some interpolations done by the author was not as accurate as I may have surmised. He further notes, “I use the NIPA accounts at bea.gov.  http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=N#S3 

You can then go to OMB for federal projections and use  the Census data for state and local projections.  … For ballpark estimates [the original] site is ok.

 Also, you should be aware that state and local spending includes intergovernmental transfers that are in addition to state and local revenue receipts.  These transfers should be backed out either at the federal level or the state and local level for total government spending.  Currently the total tax burden stands at about 27% of GDP state, local and federal, Spending is about 38% of GDP for last year and this year.”

I am eminently grateful to my friend for his observations and I stipulate that his data is doubtlessly more accurate. Still, the distinction between spending at 38% of GDP and 45% of GDP is not significant to the point I am making in this post. That is, government has achieved a critical mass and is now a self-sufficient entity that exists for its own purposes. Government, once the servant of the people has now become the master of the people.

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4 Responses to “Government Spending (post #3 of 3)”

  1. Jim Fickett Says:

    Very interesting point that it really makes no sense to track federal spending in isolation. I wonder if that substantially affects all the usual statements that European nations have higher tax and spending levels than the US.

    Your main point, that government becomes a behemoth with a life of its own, and competes with other sectors for resources, rings true to me. I worked at Los Alamos for several years, and it was strange for me to see how the laboratory there, from the end of the war on, had clearly been searching for some reason to be, but did not ever consider the possibility that perhaps there was no such reason.

    • redst8r Says:

      Thanks for the comment.
      I would be interested in the answer to whether the totality of taxes and government spending – at all levels combined – is higher in the US than in Europe. Your experience in Los Alamos is undoubtedly symptomatic of all government. It is not common for any government program at any level to ever go out of existence. A disheartening reality.

  2. mw Says:

    I’ve been beating the drum for a divided government voting heuristic for years and enjoyed your post.

    I know I am a bit late to the comment thread, but just a courtesy comment to let you know that I linked this post and quoted you and in my most recent “Carnival of divided government” – a compilation of posts on the topic.

  3. Jim Connor Says:

    If you’re interested, I wrote a rant on stupid gov’t. spending. Drop by and look up “Gov’t. intelligence, the classic oxymoron”.
    Jim

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