In today’s political climate, the more implausible the claim, the more likely it is to stick. One that seems to be sticking now is that government today is small by historical standards and constantly shrinking.
Run that one by the man on the street — looted by the tax man, harassed by police, hounded by regulators — and he will scoff. Now comes the highbrow journalist with a nuanced view to correct him, citing all kinds of complex data.
The highbrow in this case is Catherine Rampell, writing in The New York Times. Her claim seems apodictically certain. “Government has been shrinking steadily for two years,” she says, “and compared to the size of the overall economy, government is actually slightly smaller today than it has been on average in the postwar era.”
Huh? Well, she provides data of “the percentage change in total government spending and investment” as compared with the change in the GDP. She shows GDP rises and government falls. Wow, amazing.
Not so fast. You can always know that when people claim that government is small, it will always appear small by comparison to the GDP, which is to say that anything looks small by comparison to anything (in the words of economist Roger Garrison).
Moreover, it is a peculiar presumption that government should always grow in proportion to the wealth of society (presuming that GDP does measure that). Why? If government is providing essential and minimal functions only, it should get smaller in proportion to economic growth. Should the thief keep coming back for more when his victim grows wealthier?
Also, shrinking by comparison to everything else doesn’t mean that it literally gets smaller. It should only constitute a smaller portion of the total.
But that’s only the beginning of Rampell’s statistical antics. If you compare federal government spending as a percentage of GDP, it comes in at 24.3%, which is the highest in postwar history. In fact, it is the same as 1942, the year American troops landed in Europe.
So what is she talking about? Is she just making stuff up? Not exactly. She carefully says that she is looking at “the percentage change in total government spending and investment.” More precisely, she is examining something called “government consumption expenditures and total investment,” one of the ways that you can slice and dice national income accounting. This is the figure among many options that best makes her case. Piles of data had to be thrown in the trash can to generate the result she wanted.
As AmosWEB points out, this figure is the only one that completely excludes transfer payments, which are defined (arbitrarily) as not investment and not consumption, and includes all those things that (arbitrarily) fall into a specific category.
It’s a bit like saying that a giraffe is a horse if you exclude the neck.
Rampell even took the manipulation one step further to look at quarterly change in the data, and not the actual figure. Therefore, if government spends a trillion on a stimulus now and that stimulus runs out next year, it would seem to show a crash in spending. Surprise, that’s exactly what happened!
Despite her rhetoric, then, we can see that she had to engage in three levels of distortion to come up with the claim that government is shrinking.
Let’s say that we look at what most normal people would consider government spending, by which I mean… the dollar figures on how much government actually spends. And let’s add a column on debt so we can see the total unfulfilled commitments in the year in question too. There is nothing fancy pants here, just the raw truth, year by year.
Now, I ask you: Does this look like steady shrinking to you?
In other words, the man of the street is exactly right. Think about these numbers when you hear pundits and politicians over the next months tell you how dramatically government is shrinking.
Of course, spending alone doesn’t measure government size. If your front door is being broken down by feds, if you are jailed for violating regulations, if you are prevented from starting a business or if you can’t hire new workers because of the high costs, government is effectively totalitarian from your point of view. In the last 10 years, this is the largest change we’ve seen, from big government to police state. In the end, this is a change that no data set can quite capture.
Jeffrey Tucker,for The Daily Reckoning
I'm executive editor of Laissez Faire Books and the proprietor of the Laissez Faire Club. I'm the author of two books in the field of economics and one on early music. My main professional work between 1985 and 2011 was with the MIses Institute but I've also worked with the Acton Institute and Mackinac Institute, as well as written thousands of published articles. My personal twitter account @jeffreyatucker FB is @jeffrey.albert.tucker Plain old email is firstname.lastname@example.org
Hopefully voters will remove Obama and Reid from power in November. Then we can work on replacing Boehner and McConnell. We need to unite under constitutional limited government and get rid of big government. Rand Paul can do this as leader of the Senate with Paul Ryan as Speaker of the House. The Tea Party can chase all of the big government Republicans into the Democrat party where they belong.
Sell off Fannie, Freddie and Sallie. Make Medicare and Social Security voluntary programs. Close the departments of commerce, education, HUD, energy and the EPA. Challenge liberals to move to California, Illinois and Maryland. They can tax and spend all they want and show the rest of us how great big government is. Finally audit the Fed and then shut it down on its 100th birthday. Print off the dollars owed and then switch to the gold standard. End the corporate tax and the death tax. Repeal the 16th and 17th amendments.
Jeff the problem is both of you measure in dollar terms. The government may be shrinking while it spends more, then again maybe not. I’m not aware (personally) of any increased services provided by government. I still have to buy my own food, gas, house and medical insurance. One thing is clear; shrinking or not, government is getting more expensive.
It just costs more now. We call this “inflation”, or perhaps just a jobs program for people with degrees in communications.
“If government is providing essential and minimal functions only, it should get smaller in proportion to economic growth.”
true. but “essential and minimal” keeps getting defined upward, usually by popular demand. if you’re driving an oxcart over a dirt trail you don’t need government for that, but if you’re sharing a high-speed-transit road with dozens of semi’s that weigh seven tons and hundreds of other drivers who may or may not be in control and sober, all moving at 65mph, you may want a government agency or three to keep a check on things to make sure you don’t get squashed unnecessarily. if the biggest thing that can fall on your head is a dead bird then you don’t need government, but if people are flying thousands of heavy vehicles across the sky every day carrying hundreds of people or tons of equipment or who knows what else you may want a government agency or three ensuring pilot qualifications and mechanical maintenance to make sure your house doesn’t disappear in a big fireball because of someone else’s negligence. and if the worst person in your village is the idiot who drinks too much and beats his wife you don’t need government to deal with him, but in a city of millions of people that generates hundreds of viciously violent criminals each year you may want a government agency or fifty to identify, track, deal with, arrest, try, and incarcerate them so you don’t get shot trying to do all of that yourself.
government and people. same thing.
Maybe she was referring to employees . Under Obama there is a half million less govt.employees than under Bush or Clinton.
How much of the work formerly done by government employees is now “outsourced”?
The head decreases that have been reported are direct federal employees. They do not include the contractors who are entirely dependent on government contracts and payments. These indirect employees are rising exponentially. The government always has a way to hide their actions.
Government shrinking is not the same as government spending shrinking.
The federal government is shrinking in terms of the number of people who work for it, not counting the military.
You need to get your basic facts straight!
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When you've got a room full of 200 oil insiders scratching their heads at current high prices, something's gotta give.
For most investors, it’s weird to think of stocks as their go-to investing option.
The petropoly has bills to pay and setting the price of oil was a simple way to balance their budgets.
Investors don’t seem to care that what's propping up their investments is what will ultimately destroy them: government monetary policy.
For the next decade the energy revolution will be likely confined to the US, displaying the robustness of American entrepreneurship.
Why the Sage of Baltimore’s commentary persists through America’s changing times.
After attending Platt’s oil conference in London I want to relay two important themes you need to know.