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Willisms

« Trivia Tidbit of the Day: Part 885 -- Washington Spending. | WILLisms.com | Trivia Tidbit of the Day: Part 887 -- Texas Is The Model For America's Recovery. »

Trivia Tidbit of the Day: Part 886 -- An Imaginary Spending Explosion? Not.

Jolting Upward, Not Imaginary-

This is about a week belated, but Chuck Blahous just completely dismantles Paul Krugman's recent argument that federal spending hasn't really gone up:

federalspendingpostwwii.gif
As the chart above shows, federal spending reached historic levels in 2009 – to be surpassed again in 2010 – a peak in relation to the overall economy not seen since World War II. In 2009, federal spending soared to 24.7% of GDP, a figure not even closely approached since 1946.

Moreover, as the graph above shows equally clearly, these levels of spending were not solely the result of a gradual, inevitable evolution in the size of government, but instead represented a sudden surge of spending in response to the recession. From 2008 to 2009, federal spending increased by 4% of GDP in a single year. The spending increase that Dr. Krugman says “never happened” was in fact the biggest single-year spending increase since 1952.

Lest anyone believe that the rise in government spending as a percentage of GDP was largely a function of a decline in GDP itself, it should be noted that the absolute size of the spending increase over 2008-09 was also of historic magnitude – exceeded since 1952 only by 1975 (a year in which rapid nominal spending growth was partially fueled by high price inflation).

This recent spending surge is the largest reason why the federal deficit has arisen from 3.2% of GDP in 2008 to roughly 10% in each of 2009 and 2010. Once again, it bears recollection that these are the highest levels for federal deficits since (sound familiar?) World War II.

It is delusional to assert that the major increase in spending was/is merely imaginary.

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Previous Trivia Tidbit: .

Posted by Will Franklin · 26 October 2010 03:03 PM

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