Posted on 04/26/2006 2:14:17 PM PDT by Conservative Coulter Fan
When teaching economics I sometimes find it beneficial to use government budget data to apply the lessons of economics to our current political circumstances. The students tend to be surprised at the size of our government, the amount of tax revenues that we "pay," and the amount of government debt. The following numbers get the point across.
We, in the United States, live under the rule of the largest civil government, measured in budgetary terms, in history. Federal spending alone in fiscal year 2006 is expected to be over $2.7 trillion, which means the federal government spends $7.4 billion a day or $5.1 million in every minute of the year. This is 815 times the level of federal spending in 1930.
Things have been getting worse recently. In the first five years of the Bush regime, federal spending increased 45%. Readers of Mises.org may remember that they were warned about Bush's fiscal irresponsibility before he took office. For comparison's sake, during the eight Clinton years nominal federal spending increased 32%, and under Bush I federal spending increased 23% in four years. In the 2000 election, Bush II promised to shovel money into all sorts of programs — and he's kept that promise.
Since 1930, in addition to the spending increases, the feds also drove prices up more than 1,100%, according to the Consumer Price Index. Also, we should suspect that these inflation numbers are low since government officials have an incentive to underestimate inflation.
If we adjust the spending numbers to account for this inflation, real federal spending is 65 times larger than it was in 1930. The US population has more than doubled since 1930 and if we take the population changes into account, real per capita spending is 27 times higher than in 1930.
In estimating real federal spending I'm not dismissing the effects of inflation, nor am I absolving the state of its complicity in driving prices up. These calculations are simply an attempt to give us some idea of the growth in government and the attendant loss of our liberties over the last several decades.
This $2.7 trillion in federal spending breaks down to $9,000 per capita or more than $36,000 for the average family of four. If we add in all state and local spending, then total government depredations (a term Murray Rothbard used to describe the greater of government spending and government receipts) are currently over $4.4 trillion or about $14,700 per person annually. Since 1959, government depredations, in real terms, have increased at an average annual rate of 4%. That kind of spending will buy a lot of votes.
A significant portion of this spending is being financed with government borrowing. In 1930, the per capita debt load was $140 per person. The current federal total debt level is $8.4 trillion, which works out to around $28,000 per person. In short, the per capita debt load is 200 times larger than it was in 1930. Adjusting for inflation, the real debt per capita is still over 16 times more than it was in 1930.
Federal government debt increased $553 billion in fiscal year 2005 alone. That's more than $1.5 billion of additional debt per day and over $1 million of borrowing per minute for every minute of the year. The interest on the debt in 2005 was $352 billion or more than $1,100 for every man, woman, and child in the country. These interest payments are roughly equal to 37% of federal income tax revenues.
Much of this debt is owed to the Federal Reserve. US taxpayers are on the hook for $758 billion of government securities that are held by the Fed. So on average, every person in the country owes the Fed about $2500.
Tax revenues and borrowing have financed all sorts of interventions. Since 1959, we have suffered from the Great Society, the war on poverty, price controls, increasingly burdensome environmental regulations, the establishment of the Department of Education and its increasing federal control over local schools, Federal Reserve created recessions, agricultural price supports, minimum wage laws, and energy policies that keep oil and gasoline prices high.
There's more. We've also had labor policies that increase the costs of hiring workers driving down their take-home pay, trade restrictions and trade agreements that give the feds control over our international trade, massive increases in the welfare state, the drug war, endless pork barrel spending, and the prosecution of businessmen for political gain. There have also been the wars to extend the US empire, from the Vietnam War to the Iraq War. A partial list of the other military interventions would include conflicts in Cambodia, Laos, Lebanon, Panama, the Gulf War, Somalia, Bosnia, and Afghanistan. I could go on, but you get the idea.
One way to see the harm of government intervention is to realize its effects on our standard of living. The depredations of the state reduce the incentives to be productive, destroy our capital base, and have a negative effect on economic growth. From 1959 to 2005, adjusting the numbers using the implicit price deflator, real Gross Domestic Product increased an average of 3.37% annually.
Consider the possibility that government interventions reduced real economic growth 1% annually during this time. If there had been an additional 1% per year economic growth since 1959 then real GDP would currently be 55% higher than it is. The 2005 GDP of $12,479 billion would have been $19,342 billion. The median family income is estimated to be $44,389. A proportionate increase in this statistic results in a median income of $68,800.
In this scenario, a worker with a salary of $44,389 who is losing 35% of his salary to taxes has a tax liability of $15,536. After paying the various types of taxes he gets to keep only $28,853 of his salary. With the extra 1% growth per year since 1959, if that worker represented the average, his gross salary would be $68,800 and he would get to keep all of it.
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Higgs on the enemy: $19 |
It is conceivable that the $4.4 trillion of annual depredations could have caused more than 1% annual damage to our economic growth since 1959. What are the implications of a 2% negative impact on GDP? If the absence of interventions had added an additional 2% annual growth, this would have resulted in 141% more output today. The 2005 GDP would have been over $30 trillion and the median family income would now be $107,000. The worker described above with the $44,389 gross salary and the $28,850 of after tax pay, would have an income of $107,000. The depredations have reduced his net income by 73%.
The point here is that we cannot precisely know the magnitude of the damages that intervention has on the economy but we do know that those damages compound over time, resulting in significant negative effects on our prosperity.
Those of us making the case for liberty have logic, history, and morality on our side. Government intervention is immoral and should be stopped for that reason alone. However, the economic costs of the intervention are also important. Part of the appeal of freedom is that it leads to tremendously higher standards of living and these numbers show that government interventions that cause seemingly small amounts of harm, over time, impoverish a society.
Mark Brandly teaches economics at Ferris State University and is an adjunct scholar of the Mises Institute and the Mackinac Center for Public Policy. Send him mail. Comment on the blog.
The problem is that balancing the budget was merely a broken campaign pledge...I would compare it to Clinton running on Welfare Reform, but in office he vetoed such reform TWICE uintil finally he relented to Congress. Secondly, despite all the New Deal infusions...we saw a prolonged Depression that did not end until after WWII. You should read 'FDR's Folly' for more on this subject.
I agree, having created a site called Clinton's Bin Laden-gate, but I disagree having supported both the War in Afghanistan and Iraq, because our mission has focused more on nation building in both those countries while even the President has repeatedly made politically correct statements about how Islam is a religion of peace. Furthermore, you may surprised to learn that defense spending really hasn't increased nowhere to the extent non-defense discreationary spending has...
Well Clinton-lite is better than Clinton-max. And you got two conservative judges instead of two more Ginsbergs. Kind of hard to put a smiley face on this stench but politics is, after all, always about the lesser of evils.
A president who knows that preventive medicine with prescription coverage means medicare will spend less on seniors because they will get to the doctor before they're diagnosed with high blood pressure, diabetes, or heart troubles. Will get some treatment so their bones don't break before they learn their lacking calcium.
Sorry if you'd rather the young and the old go straight to hell for all you care.
Better these things than more great society welfare that doesn't work.
It would be hard to believe that he wasn't. He was ranked most liberal Senator in Congress for a few years if you recall.
Of course KerryGore would have gone on an E.O. rampage, just like Clintoon did.
Inflation, the answer to debt. It's the government way.
Seems to me the "wasted" vote is the vote for big government. With both the dems and pubs neck and neck in the race for insanely bloated government, a vote for either of those parties would seem a "wasted" vote.
Yeah, right. Kerry was the most liberal Senator in the place. Had Kerry been President we wouldn't have gone after Al Quada, we would have had tax increases instead of tax cuts, would have been "negotiating" with Iran and had two more Ginsberg's on the SC. It's interesting to me how people get carried away and completely lose perspective. Yes, things can always be worse.
"It would be hard to believe that he wasn't. He was ranked most liberal Senator in Congress for a few years if you recall."
The president needs to have congress pass a law before he signs it. Republicans have demonstrated that they hold a democratic president to a MUCH higher standard than they hold their own.
Kerry would try to spend more, but fail.
We'll, we have conservative judges because CONSERVATIVES nrefused Harriet Miers nomination! I suppose you want us to make a Faustian Deal..
Who knows. The whole thing looked like a ploy and she was pulled. I'm not convinced conservatives had that much to do with it. Bush does his own thing and we can all attest to that.
Kerry would spend more. Somehow I don't feel that confident our wobbly Republican Congress would have been that successful in holding him back based on their track record.
for later
Sadly, I agree
Considering he referenced the Bush Administration as "Bush Regime", I would guess so...
That's right. "With Bush all we got was Clinton-lite." Triangulation to win elections.
Pointing out how this administration wastes my tax dollars is not a liberal position. It's a conservative one. Something Republicans know little, if anything, about.
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