Pandering to Bad Arithmetic
The problems of our economy are often attributed to excessive government spending.
I have all kinds of problems with that. But suppose it is true. If excessive government spending is the cause of our economic problems, then a lessening of the excess should reduce our economic troubles. Right?
As this graph from PerotCharts shows, there was a 17-year trend of lessening of the excess.
The 17-year downtrend begins in 1983, when federal spending amounted to 23.5% of GDP. The trend ends in 2000, with federal spending at 18.4% of GDP. This is a significant decline.
Much of that decline was due to cuts in military spending, as noted in my previous post. And that was probably a bad decision, from a national perspective. But from an economic perspective, a cut is a cut. From the economic perspective, excessive federal spending was significantly reduced.
It didn't solve our economic problems.
// UPDATE 18 July 2011
PerotCharts is apparently down, so I have replaced my link-to-their-graph with a screen capture I made a while back.
Making two points explicit:
ReplyDelete1. The "subject" of this post title is the notion of comparing things to GDP.
2. The "problems" I have with comparing things to GDP center around the fact that GDP is not growing as fast as we want. The trend of GDP growth since the early 1970s is: slow growth.
When you compare something that's growing normally to something that's growing slowly, the normal thing appears to be growing fast. Even though it isn't.