In drawing up the agenda for the House Republican retreat underway in Williamsburg, I am very confident in asserting that organizers did not for a moment consider America’s preeminent number-cruncher, Nate Silver, as a potential presenter. He is, after all, still being punished for correctly predicting the outcomes of the last two presidential elections.
That’s too bad, because the solons might have learned something—and not just about public opinion. Earlier this week Nate put up a post at FiveThirtyEight that analyzed government spending over time and as a percentage of gross domestic product. You can and should read the whole thing, but I want to draw attention to four particular findings by Nate that are very important as we enter the annual season of national agonizing over federal spending.
The first, and best-known, data point, is that the growth of “entitlement spending” in recent years has very much been the product of a health care cost spiral that has equally affected public and private spending. That’s significant because progressives tend to favor more government intervention to stabilize health care costs (while expanding coverage), while conservatives tend to favor privatization (while abandoning or paying little attention to a goal of universal coverage that used to be a bipartisan totem). Both sides claim their policy prescriptions will break the cost spiral, but in case that doesn’t happen right away, progressives favor socializing the costs through mandatory cost-sharing in private markets and progressive taxes in the public sector, while conservatives favor shifting costs to consumers (or in the case of public programs, beneficiaries) on the theory that Americans should take greater “personal responsibility” for health care.
These are diametrically opposed approaches based on different philosophies, policy goals, and readings of empirical reality. Compromising between them could produce outcomes perverse to both points of view.
The second data point I’d like to highlight is that of all the contributors to “runaway federal spending,” the item that can’t be blamed at the moment is interest on the national debt, which as Nate points out represent less than half the level of 1991 as a percentage of GDP. So for all the endless talk of an unsustainable debt burden that will blight the lives and crush the souls of our children and grandchildren, persistently low interest rates (themselves a refutation of the claim that financial markets are panicked about debt) have made federal borrowing a bargain.
The third often-forgotten fact is that although defense spending is much lower as a percentage of GDP than it was at the height of the Cold War, it’s still a lot of money for a nation in relatively peaceful times, and currently represents 24% of federal spending, up from 20% just a decade ago.
And finally, Nate’s analysis illustrates the remarkably little-understood fact that much of what we think of as “government spending”—the vast array of non-entitlement federal programs that deal with everything from roads and bridges to schools and prisons and environmental protection efforts—represent a very small (2.5% of the budget in 2011) and generally stable (less as a percentage of GDP than it was in the early 1970s) share of the federal budget and of GDP.
Many years ago, I used to do a presentation on the federal budget that including an exaggerated but generally accurate sound-bite: “In this country the federal government doesn’t do a lot other than fighting and anticipating wars, writing regs, and cutting checks.” My main point was that most of what government actually does in the domestic arena is actually done by state and local governments—or increasingly by the private sector responding to regulations and tax credits and other inducements. States and localities have relatively limited abilities to respond to conditions requiring increased spending, thanks to balanced budget requirements and borrowing limitations. So the counter-cyclical role of the federal government in subsidizing state and local services in a recession or a period of stagnant growth is very important—not that you would know it from the repeated “freezes” and “sequesters” to which non-defense discretionary spending is being exposed. Now if you are a conservative who doesn’t believe government at any level has much business running schools or regulating the environment or helping poor people survive, that’s just fine. But progressives, even those who say we need a big, bold, active government, don’t tend to put any kind of priority on aid to state and local governments when budgetary decisions are being made.
If all these numbers seem to exist in a reality parallel and quite different from what we hear in Washington so often, that’s not because they aren’t as important as which “team” is winning this or that maneuver over taxes or the debt limit—or because, as progressives often seem to think, we should just ignore federal spending altogether and focus on raising the revenues necessary to pay for them. It’s a hackneyed but nonetheless acutely true saying that public budgets reflect an agenda of investments and services we choose to tax ourselves to provide. Whether you think federal spending on this or that item is a problem or a solution, it’s fundamental to every question we ask ourselves about the direction of the country.
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