The Government Is No Drunken Sailor

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

You know that rap about runaway spending under Obama?  Well, if you actually look at the outlays on the books during the Obama administration, adjusting for inflation and population growth, you get the picture below.

The figure shows significant spending growth in only one year: 2009, as outlays rose to meet the deepest recession since the Depression, including automatic stabilizers and stimulus.  Since then, outlays have fallen, adjusting for inflation and population growth.  From 2009 to 2013, they’re down 12 percent; compared to 2008, they’re up 3 percent, not quite the spending spree that is often suggested in partisan debate.

Source: CBPP analysis of OMB and BLS data.

Second, new analysis by my CBPP colleagues Richard Kogan and William Chen shows that relative to projections that were made in 2010, spending reductions in various bills, including the Budget Control Act (2011), the American Taxpayer Relief Act (2012), the Bipartisan Budget Act (2013), and the recent farm bill generated deficit savings of $2.5 trillion over the current 10-year budget window (2015 to 2024).  Adding in the associated reduced interest payments of about $650 billion amounts to $3.2 trillion in deficit savings from spending cuts.

Revenue added about $950 billion and technical and economic changes added savings of about $840 billion. Thus, Mr. Kogan and Mr. Chen find $5 trillion in savings over the budget window relative to the 2010 baseline.

Moreover, as the figure below reveals, 77 percent of the savings that come from policy changes (i.e., excluding technical and economic changes) are from spending cuts to government programs; less than a quarter come from revenue.  Thus, to the extent that further deficit reduction is warranted â€" as it is decidedly not in the near term â€" this analysis strongly points toward the necessity of new revenue.

As intimated above, neither of these developments should be seen as anything like great achievements.  The stimulus response to the Great Recession was too short-lived, and many of the program cuts in that orange pie slice above have been thoughtless slash-and-burn (sequestration) that have and will continue to make life harder for economically vulnerable families.  And from the perspective of the macroeconomy, the decline in the budget deficit from 10 percent of G.D.P. in 2009 to 3 percent in 2013 is the sharpest fall in the budget deficit since 1950. It is the source of the fiscal headwinds that have consistently held back the recovery.

But one thing you can’t say, at least if you want to be factual, is that the federal government has been spending like a drunken sailor and we’re doomed to Grecian levels of insolvency.  Of course, if you don’t want to be factual, you can say anything you want.