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Source link: http://archive.mises.org/4558/spend-spend-spend/

Spend, spend, spend…

January 13, 2006 by

Since those ardent constitutionalists and stalwarts of small government in the Bush administration took over their desks at the start of 2001, Leviathan has racked up an aggregate spending total of a whisker under $11 trillion – around 25% of cumulative, non-government GDP in the period.

Representing a rapid growth of 31% over the previous five-year period, it is also noticeable that the increase in total public debt (including social security) has amounted to $2.5 trillion, meaning that almost a quarter (23%) of this latest spending has been borrowed, versus a mere 8% in the prior quinquennium. (It should also be noted that this $2.5 trillion excess almost exactly matches the total trade deficit simultaneously run up)

Meanwhile, Federal Reserve and foreign CB holdings of US debt have risen by just over $1 trillion, thus ‘monetizing’ not only close to $1 in every $10 of this torrent of pork and war finance, but also a startling 90c in every $1 of extra marketable debt issued.

{ 11 comments }

Chris Meisenzahl January 13, 2006 at 7:15 am

Very disheartening. ;-(

Yancey Ward January 13, 2006 at 8:19 am

The final, irrefutable proof that all politicians are big-state politicians.

William January 13, 2006 at 8:30 am

Please remember that by far the largest of these expeditures will never go a way and the second largest will be with us for quite some time.

The largest of the Bush largness and that is mighty big is of course Prescription Drugs for Seniors. Once enacted this health-financial train wreck will be there for good.

The second largest, the pointless war in Iraq, will be with us for at least 2 more generations as veterans claims continue.

edhopper January 13, 2006 at 9:08 am

“The final, irrefutable proof that all politicians are big-state politicians.”

So why did Clinton leave us with a surplus?

corrigan January 13, 2006 at 9:30 am

Clinton’s surplus was (a) an accounting fiction since overall debt including social security went up all through the period and (b) he reaped inordinate gains from taxes directly related to the stock market bubble.

Between 1996-01 peak April tax receipts were atypically 80% higher than the average of the previous 11 months, wheareas for 1990-95 and 2002-05 this seasonal AMT/capital gains peak was just under 50% of the 11-month average.

That alone was enough to add around $270 bln to the accounts, in addition to the stimulus to overall economic activity from the Bubble.

The Boom hid a lot of Clinton/Rubin’s sins, just as they covered up Greenspan’s missteps.

Yancey Ward January 13, 2006 at 10:02 am

ed hopper,

See Corrigan’s comment after yours, but I would add that Clinton benefitted from having the opposition in control of the legislative branch. From 1995 until about the end of 1998, the two sides could not agree on how to spend the spigot of money from the stock market boom and, by default, the government actually grew more slowly. However, you could see this stalemate was beginning to break down even before Clinton left office. Having the Republicans in complete control, of course, has completely opened the floodgates, but don’t come here spouting nonsense about how Democrats are prudent, they just don’t have power at the moment.

edhopper January 13, 2006 at 11:40 am

I guess there weren’t record deficits under Reagan, who had an opposition Congress. And Clinton didn’t oversee the passage of Balanced Budget legislation with out a single Republican vote.
Now, please tell me how G W Bush is fiscally responsible and the tax cuts have nothing to do with the deficit. Also the current housing bubble hasn’t accounted for any of the growth we have experienced in the last 4 years. Since bubbles only help Dems.

Yancey Ward January 13, 2006 at 12:37 pm

ed hopper,

I realize that you are a product of the public school system and likely don’t read very well, but please point to me where most of the commenters here, including myself, have been writing that George Bush and the Republicans were fiscally responsible. It is very ironic to find your comment attached to an article discussing how the present government (Bush and the Republicans, if I remember correctly) is happily spending us into the ground.

As to your questions about Reagan, so what? Most of his term of office included a Republican majority in the Senate, and partially effective control of the House since there were large numbers of conservative Democrats in the House at the time.

However, I noticed that you didn’t respond to Corrigan’s point that the budget was not balanced during Clinton’s term in office, as evidenced by the fact that the outstanding debt increased every single year.

R. Davis January 15, 2006 at 1:58 pm

Clinton’s surplus was (a) an accounting fiction since overall debt including social security went up all through the period and (b) he reaped inordinate gains from taxes directly related to the stock market bubble.

It is true that the gross federal debt did continue to increase every year under Clinton. In fact, it has done so in every year since 1969. However, there was a rapid decrease in the gross federal deficit, from $403.6 billion in 1992 to $23.2 billion in 2000. Since then, there has been an even more rapid increase, with the deficit reaching $594.7 billion in 2004.

Between 1996-01 peak April tax receipts were atypically 80% higher than the average of the previous 11 months, wheareas for 1990-95 and 2002-05 this seasonal AMT/capital gains peak was just under 50% of the 11-month average.

It is likewise true that Clinton benefited from the stock market bubble. However, some of the increased peak April tax receipts was due to the increase in income tax rates in 1993. The most accurate way to estimate what portion was due to the stock market bubble would likely be to look at those receipts that came from capital gains taxes. I have not run across this data and would be interested in any source that anyone can provide.

In summary, I agree that the reported surpluses did not signal an end to our financial problems as some have suggested. Even in Clinton’s last budget, the government was projecting that the public debt would rise sharply in the second half of this century as Medicare, Social Security, and Interest costs continued to rise. This can be seen in the graphs and tables at http://home.att.net/~rdavis2/pro2001.html . However, I do think that Clinton did have a much better appreciation for the fiscal risks that we face and followed a much more fiscally responsible policy than the current administration.

fancyleprachaun January 16, 2006 at 9:58 pm

However, I do think that Clinton did have a much better appreciation for the fiscal risks that we face and followed a much more fiscally responsible policy than the current administration.

And your point is what?

Are you expecting us to heap praise at the altar of state now?

fancyleprachaun January 16, 2006 at 9:59 pm

whoops, sorry thought you were mr nighthawks for a second.

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