Even prior to the financial crisis, it was not unusual for politicians and pundits to assert that government spending is out of control. That government just keeps growing and growing and growing.
Did you ever wonder if it was true?
Last year the U.S. GDP was $13.8 trillion.
As of September 2008, the total U.S. federal debt was approximately $9.7 trillion. Of this amount, debt held by the public was roughly $5.3 trillion. (Where is the other $4.4 trillion? Its already been spent by your parents’ generation but they’ve left little IOU’s in the U.S. Treasury telling us that they’d find some way to pay the Treasury back when the time comes for them to retire.)
As of 2005, total U.S. household debt, including mortgage loan and consumer debt, was $11.4 trillion in 2005.
As of 2005, total U.S. household assets, including real estate, equipment, and financial instruments such as mutual funds, was $62.5 trillion in 2005.
In 2007, total governmental debt amounted to 65.5 percent of GDP. The CIA ranked the total percentage as 26th in the world.
| Country | Public debt (% of GDP) |
Country | Public debt (% of GDP) |
||
|---|---|---|---|---|---|
| Japan | 195 | Germany | 63 | ||
| Italy | 104 | Austria | 59 | ||
| Belgium | 85 | Netherlands | 46 | ||
| Israel | 81 | United Kingdom | 43 | ||
| Norway | 75 | Sweden 41 | 41 | ||
| Canada | 69 | Spain | 35 | ||
| United States | 66 | South Korea | 33 | ||
| France | 64 | Finland | 31 | ||
| Portugal | 64 |
We’re more or less in the same boat as the other OECD countries. Probably in better shape if you compare our demographics to Europe’s and Japan’s.
Below, I’ve provided selected Federal Debt information from the Congessional Budget Office and the Treasury.
I’ve limited the number of years for simplicity’s sake but have picked these years for specific reasons. The federal debt exploded after 1980 under Reagan. 1986 produced the largest federal deficit as a percentage of GDP. 1992 was the tipping point year after which the deficit was reduced under Clinton. 2000 was the high-point of government surplus. 2004 was the largest Bush II deficit.
| Basic Federal Budget Facts | ||||||||
|---|---|---|---|---|---|---|---|---|
| Year | GDP | Fed Budg. |
Def. | % GDP | Public Debt |
% GDP | Total Debt |
% GDP |
| 1980 | $2.7 t | $0.6 t | -$74 b | -2.7% | $0.7 t | 26% | $0.9 t | 33% |
| 1986 | $4.4 | $1.0 | -$221 b | -5.0% | $1.7 | 39% | $2.1 | 48% |
| 1992 | $6.2 | $1.4 | $-290 b | -4.5% | $3.0 | 48% | $4.1 | 66% |
| 2000 | $9.7 | $1.8 | $236 b | 2.5% | $3.4 | 35% | $5.7 | 62% |
| 2004 | $11.5 | $2.3 | -$413 b | -3.6% | $4.3 | 37% | $7.4 | 64% |
| 2007 | $13.6 | $2.7 | $-161 b | -1.2% | $5.0 | 37% | $9.0 | 66% |
Items of Note:
Look at it like this. Your parents chose to use excess social security taxes for general funding purposes. Eventually, either income taxes have to go up or social security benefits have to go down in order to reverse that gap and fund that portion which they refused to set aside when they were younger. This is why, no matter your ideological leanings, Barack Obama’s panderings to reduce taxes on the elderly is asinine.
On the other hand, that $4 trillion in “debt” is a drop in the bucket as to the total social transfers which will be made over the next century. About 6% of the total. In that light, its really not that bad.
The next table breaks down federal government revenues by source as a percentage of GDP for the same six years.
| Federal Receipts by Source as % GDP | ||||||
|---|---|---|---|---|---|---|
| Year | Individual | Corporate | Social Sec. | Other | Borrowing | Total |
| 1980 | 9.0 | 2.4 | 5.8 | 1.9 | 2.7 | 19.0 |
| 1986 | 7.9 | 1.4 | 6.4 | 1.7 | 5.0 | 17.5 |
| 1992 | 7.6 | 1.6 | 6.6 | 1.6 | 4.5 | 17.5 |
| 2000 | 10.3 | 2.1 | 6.7 | 1.6 | -2.5 | 20.9 |
| 2004 | 7.0 | 1.6 | 6.4 | 1.3 | 3.6 | 16.3 |
| 2007 | 8.5 | 2.7 | 6.4 | 1.3 | 1.2 | 18.8 |
Items of note:
The next table separates government spending into discretionary and mandatory spending.
| Federal Spending as % of GDP | |||||
|---|---|---|---|---|---|
| Year | Discretionary | Mandatory | Offsetting Receipts |
Net Interest | Total |
| 1980 | 10.1 | 10.7 | -1.1 | 1.9 | 21.7 |
| 1986 | 10.0 | 10.5 | -1.0 | 3.1 | 22.5 |
| 1992 | 8.6 | 11.5 | -1.1 | 3.2 | 22.1 |
| 2000 | 6.3 | 10.6 | -0.8 | 2.3 | 18.4 |
| 2004 | 7.8 | 11.7 | -0.9 | 1.4 | 19.9 |
| 2007 | 7.6 | 11.9 | -1.3 | 1.7 | 20.0 |
Items of note:
The next table is discretionary spending only.
| Discretionary Spending as % of GDP | ||||
|---|---|---|---|---|
| Year | Defense | International | Domestic | Total |
| 1980 | 4.9 | 0.5 | 4.7 | 10.1 |
| 1986 | 6.2 | 0.4 | 3.3 | 10.0 |
| 1992 | 4.8 | 0.3 | 3.4 | 8.6 |
| 2000 | 3.0 | 0.2 | 3.1 | 6.3 |
| 2004 | 3.9 | 0.3 | 3.5 | 7.8 |
| 2007 | 4.0 | 0.3 | 3.4 | 7.6 |
Items of note:
Finally, we have mandatory spending.
| Mandatory Spending as % of GDP | ||||||
|---|---|---|---|---|---|---|
| Year | Social Security | Medicare | Medicaid | Other | Offsetting Receipts |
Total |
| 1980 | 4.3 | 1.2 | 0.5 | 4.6 | -1.1 | 9.6 |
| 1986 | 4.5 | 1.7 | 0.6 | 3.7 | -1.1 | 9.4 |
| 1992 | 4.6 | 2.1 | 1.1 | 3.8 | -1.1 | 10 .4 |
| 2000 | 4.2 | 2.2 | 1.2 | 3.4 | -0.8 | 9.8 |
| 2004 | 4.3 | 2.6 | 1.5 | 3.4 | -0.9 | 10.8 |
| 2007 | 4.3 | 3.2 | 1.5 | 3.1 | -1.3 | 10.6 |
Items of note:
John McCain
So, what have we learned about McCain’s statements that the real problem is spending, not lower taxes?
He is correct in that Federal spending as a percentage of GDP has risen from 18.4% of GDP to 20.0% of GDP. That’s an extra 1.6% for the math impaired. The source of that increase is obvious: Defense (+ 1.0%) and Medicare/Medicaid (+1.3%). All other government spending has fallen 0.7% during that time.