Just the Facts on Big Spending

Posted by Hugh Johnson on Thursday, May 24th, 2012, 3:13 PM PERMALINK

Unlike most normal people, we closely follow Twitter wars between competing economists.  On Wednesday, AEI economist James Pethokoukis took issue with Rex Nutting of MarketWatch.com who claimed Obama is not a big spender because spending rose 1.4 percent during his Presidency

First of all, Nutting doesn’t give credit to Tea Party conservatives for preventing rapid spending growth of the kind President Obama’s budget proposes.  Secondly, Pethokoukis points at two overlapping metrics which accurately show Obama’s big spending tendencies—baseline spending and spending as GDP.

Nutting’s baseline is FY2009 part of which fell under Bush’s final budget and represented the initial injection of failed stimulus dollars that drove up federal spending.  From this high spending baseline and ignoring Republican opposition to even more spending, it’s easy to claim Obama is a tightwad because spending grew 1.4 percent over 3+ years.  It’s like a football team starting every drive on its own 1 yard line.  They’re never going to score and the defense looks artificially good by comparison.

To measure Obama’s big spending tendencies, Pethokoukis looks at government spending as a percentage of GDP.  While the historical average has been 20 percent, under Obama the average has been roughly 24 percent.  Again, Nutting’s 2009 baseline was 25.2 percent according to OMB so by comparison, Obama will look like a cheapo—but that’s the problem with Nutting’s analysis.

In addition to these two metrics, we like to look at a third point: what trajectory would spending take under a second Obama term?  According to the President’s OMB analysis, under Obama’s latest budget proposal spending as a percent of GDP declines to 22 percent by 2018 then trends upward to 22.8 percent by 2022.  The historical average is 20.6 percent. 

The President’s budget doesn’t bring government spending down towards historical trends; it trends towards more spending and increased public debt.  According to CBO, by 2022 the President’s budget increases public debt to 76.3 percent of GDP whereas baseline CBO projections put publically held debt at 61.3 percent.

Obama is a big spender and wants to inject more of your taxpayer dollars into failed stimulus and crony capitalist policies.  The President and Joe “Summer Recovery” Biden demagogue Tea Party conservatives as the party of “No” and this is correct—they’ve said no to even more spending and higher taxes that the President wrongly feels is right for the country.  Pethokoukis is correct in pointing out Nutting’s flawed analysis and wins the Twitter war with a nice counterfactual that ATR likes to cite: How much higher would spending be if Democrats still had huge congressional majorities?