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Reply #62: The Obama Spending Non-Surge Paul Krugman [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Nov-28-11 02:20 PM
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62. The Obama Spending Non-Surge Paul Krugman
http://krugman.blogs.nytimes.com/2011/11/27/the-obama-s...

...what Im seeing in comments and reactions, once again, is the claim that Obama has presided over a vast expansion of government a claim backed not by describing any specific programs, but by pointing to the share of federal spending in GDP. Indeed, federal spending rose from 19.6% of GDP in 2007 to 23.8% in 2010 (it was briefly 25 in 2009, but that was a number distorted by the financial bailouts). So there has been a roughly 4 points of GDP rise in the spending share. Whats that about?

Well, part of the answer is that the ratio is up because the denominator is down. According to CBO estimates, in fiscal 2010 the economy operated about 7 percent below potential. This means that even if what the government was doing hadnt changed, the federal spending share of GDP would have risen by 1.4 percentage points.

Then, look inside the budget data (pdf), specifically at Table E-10. Youll see a surge in spending on income security; thats basically unemployment insurance, food stamps, and similar items. In other words, spending on safety-net programs is up because the economy is depressed, and more people are falling into the safety net.

Youll also see a sharp rise in Medicaid; again, this is because the lousy economy has pushed more people into hardship, making them eligible for the program...

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