Will Government Grow or Remain the Same Size?

[Shek]

Will the US government grow or remain the same size given the prospect of the proposed fiscal stimulus? Greg Mankiw postulated this question two weeks ago:

http://gregmankiw.blogspot.com/2008/...overnment.html

The above figure (reprinted from my favorite textbook) shows government revenue as a percent of GDP. The most noteworthy feature of these data is the substantial growth of government from 1929 to 1945. It is easy to understand why the size of government grew so much during this period: The nation was responding to the crises of the Great Depression and, especially, World War II. But what is noteworthy is that while these crises were transitory, the increase in the scope of government was permanent.

This historical episode is one reason why advocates of limited government are rightly worried about the fiscal stimulus package that the incoming administration is going to propose. Rahm Emanuel, the new White House chief of staff, is reported to have said, "You don't ever want to let a crisis go to waste: It's an opportunity to do important things that you would otherwise avoid." It is not entirely clear what he meant by this. But one interpretation is that he wants to use a temporary crisis as an pretense to engineer a permanent increase in the size of government.

Here is one question reporters should focus on when evaluating the proposed plan: Five or ten years from now, when the economy is presumably at some normal level of employment and growth, what will the federal budget look like, as evaluated by the budget deficit and tax revenue as a share of GDP?

----
Update: Russ Roberts emails me that "Robert Higgs's Crisis and Leviathan is devoted to the relationship between the size of government and crisis." Thanks, Russ, for the reference.

[Blue]

Well over the next four years it will most definitely bloat!

Rahm Emanuel, the new White House chief of staff, is reported to have said, "You don't ever want to let a crisis go to waste: It's an opportunity to do important things that you would otherwise avoid." It is not entirely clear what he meant by this.

Oh puhleeze! Greg! Clean out your ears, take off the rose-colored glasses and put on the scrips. Pour a nice, big steaming cup of reality check and settle in next to the radio and listen to a little Rush Limbaugh. He'll give you the 411 on that. ;)

I see drops around 1980, increases in the 90s and drops in 2000. Can anyone see the pattern here?
Obama has promised record spending on new programs during the election. One of the few things he was not lying about, IMO.

[Shek]

I see drops around 1980, increases in the 90s and drops in 2000. Can anyone see the pattern here?

To be fair, Bush 43's growth in government spending won't be truly felt for several years until Medicare Part D kicks in as the baby boomers retire in larger numbers, so I'm not looking for a partisan divide here.

Heck, the huge scale of the TARP has recast American's standards for the scale of any potential bailout, and so an argument can be made that Obama is simply picking up where Bush left off, and while the counterfactual of a McCain presidency isn't certain, based on the proposals from the campaign, I don't think that we'd see a much different outcome. While his pork-busting campaign would be philosophically opposed to big government, the reality is that the scale of savings would be a raindrop against the storm of new spending on a fiscal stimulus.

[Is Real]

Regardless of who is in office I feel the Fed will do what it likes. Its funny but the only person I listen to seems to be the only person noone else wants to listen to Ron Paul.
I mean what Ron paul calls for is a 180 in spending policies which would make everyday life for Americans harsh to say the least. But if it would save our America then I'm all for it....

[Blue]

Regardless of who is in office I feel the Fed will do what it likes. Its funny but the only person I listen to seems to be the only person noone else wants to listen to Ron Paul.
I mean what Ron paul calls for is a 180 in spending policies which would make everyday life for Americans harsh to say the least. But if it would save our America then I'm all for it....

You'll find a slew of Libertarians here Is Real;) We hear ya':)

[Blue]

Heck, the huge scale of the TARP has recast American's standards for the scale of any potential bailout, and so an argument can be made that Obama is simply picking up where Bush left off,.....

I swear, check my posts, been sayin all along McCain/Obama, two sides of the same coin, and either would take us to the same place. The people are going to have to fix this one I fear. Problem just keeps compounding with the bailouts. I think the damage being done now will make recovery much, much longer and more painful. Or at worst, impossible

[Is Real]

I swear, check my posts, been sayin all along McCain/Obama, two sides of the same coin, and either would take us to the same place. The people are going to have to fix this one I fear. Problem just keeps compounding with the bailouts. I think the damage being done now will make recovery much, much longer and more painful. Or at worst, impossible

I read an article not too long ago about the panel that oversees debates. Whats odd is that the two heads of staff who are responsible are republican and democrats meaning that any one else who is affiliated with any other party is just sh!t out of luck. I dont see how that's fair elections to me..

[astralis]

7thsf,

I see drops around 1980, increases in the 90s and drops in 2000. Can anyone see the pattern here?
Obama has promised record spending on new programs during the election. One of the few things he was not lying about, IMO.

not all government spending is bad, which is all the more true during a time of severe recession. i'm actually a lot more comfortable with the type of government spending obama promises to do, which is infrastructure/technology/education investment, than i was with the government spending bush did (namely, a huge payout to the AARP).

[Blue]

I read an article not too long ago about the panel that oversees debates. Whats odd is that the two heads of staff who are responsible are republican and democrats meaning that any one else who is affiliated with any other party is just sh!t out of luck. I dont see how that's fair elections to me..

Dems and Reps agree on one thing.....Keep everyone else out of the debate. Why? They would get slaughtered by nearly any other third party. I firmly believe that if Barr or Paul, or even Nader had been allowed to join the debates this election would have had a way different outcome.

[Blue]

7thsf,
not all government spending is bad, which is all the more true during a time of severe recession. i'm actually a lot more comfortable with the type of government spending obama promises to do, which is infrastructure/technology/education investment, than i was with the government spending bush did (namely, a huge payout to the AARP).

I can agree with that. However, I think this bailout business has done irrepairable damage.

[lwarmonger]

Dems and Reps agree on one thing.....Keep everyone else out of the debate. Why? They would get slaughtered by nearly any other third party. I firmly believe that if Barr or Paul, or even Nader had been allowed to join the debates this election would have had a way different outcome.

I seriously doubt that. The majority of people simply dismiss third parties out of hand even if ideologically they do have some sympathy's towards them. Bob Barr was a nutjob. If the Libertarians had nominated someone serious and thoughtful instead of a sarcastic pr*ck they might have gotten someplace this year (not the presidency, but also not consigned to complete irrellevence either), as a lot of Americans do agree with their ideals. Personally I don't think that the principles of miniscule government that carried the US from 1789 to 1932 really are practical now that the US is a global power, but a lot of Americans don't care about that. Nader, whether in the debates or not, had no chance. The United States has too small of a far left or "green" population to really give him one. Ron Paul struck a cord with a lot of Americans, but usually impassioned pleas for things don't tend to play well it the Republican Party base, who tends to prefer strong leaders to come out of primary contests. Whatever their faults, Mitt Romney and John McCain as the final two serious contenders were strong leaders. Ron Paul never struck me a such.

[astralis]

7th,

However, I think this bailout business has done irrepairable damage.

most economists think we narrowly missed a depression or at least a very severe recession with the bailout. i think libertarians like yourself can find a silver lining in all this- the size of the bailout just moved up the date when the big federal domestic spending programs will NEED to be trimmed.

[Blue]

I seriously doubt that.

You're completely missing my point. We will NEVER know because they where not allowed to debate the big two on a MSM forum or at all for that matter. Both parties are afraid because Libertarians and Constitutionalists take the BEST from Dems and Reps and but it together. THATS what they are afraid of. Notice that the big two always talk about THEM winning this or that, not America! The big two have been incharge for the last century and look where we are at today. Its time for some fresh air.

Last I checked there is nothing in the Constitution that says only two parties allowed. They where absolutely denied serious debate in this election and all for the last hundred years IMO. What are they afraid of? Why not allow the other absolutely legitimate parties access to the same political process as others? I am beginning to believe that we are living in some kind of psuedo democracy.

[Blue]

most economists think we narrowly missed a depression or at least a very severe recession with the bailout.

But still many think the worst is yet to come as do many Americans.

i think libertarians like yourself can find a silver lining in all this- the size of the bailout just moved up the date when the big federal domestic spending programs will NEED to be trimmed.

Good point. So why has Obama proposed at least 1.2 TRillion in spending? Yes I said trillion. I said it because he hasn't been quoted once saying it, wouldn't want to give America sticker shock from what it just voted in, but it is on paper he wrote.

[Blue]

I think this thread is worth a bump. I find it interesting when we look back at what we said and what has happened. I sure get tired of being right.