The Myth of the Out-of-Control Federal Government

February 29, 2012 at 3:28 pm

Are the size and reach of the federal government exploding, as some have suggested?  While overall federal spending is well above its historical average as a share of the Gross Domestic Product (GDP) and is expected to remain so even after the economy recovers, our new examination of the latest Congressional Budget Office (CBO) data belies claims of a large and permanent expansion of the federal government.

Non-Interest Spending Outside Medicare and Social Security Set to Fall in Coming Decade

Here’s what we found:

  • If we continue current policies, federal expenditures outside of interest payments on the debt are projected to decline in the decade ahead as the economy recovers. In fact, these expenditures (which analysts call “primary outlays”) have already fallen from 23.9 percent of GDP in 2009 — at the bottom of the recession — to a projected 22.0 percent of GDP in the current year, 2012.  They are projected to fall further, to 20 percent of GDP or lower in the latter part of this decade.
  • Total non-interest spending outside of Social Security and Medicaretwo programs whose costs are being driven up by the aging of the population and the rise in health care costs throughout the U.S. health care system — will fall well below its 50-year historical average in the decade ahead (see graph).  By 2022 it will fall to 10.8 percent of GDP, compared to an average over the 1962-2011 period of 13.0 percent (see table).

As we conclude:

To be sure, in subsequent decades, as the population continues to age and health care costs continue to rise, federal non-interest spending will climb significantly higher.  One key factor is that average health care costs are considerably greater for people in their 80s and 90s than for people in their late 60s and early 70s, and the baby boomers will become very old in future decades.  In addition, if the debt continues to rise faster than GDP, interest costs will continue to swell.  We will have to tackle these issues.

Program Spending as a Share of GDP Under Continuation of Current Policies
Avg 1962-2011 2012 2017 2022
Primary outlays 18.5% 22.0% 20.0% 20.0%
Less Social Security 14.5% 17.1% 14.9% 14.5%
Less Social Security and Medicare 13.0% 13.8% 11.6% 10.8%
Note: program spending includes all federal expenditures other than net interest on the debt. Sources: OMB through 2011; CBPP analysis of CBO data thereafter.

But when Americans hear talk of the government exploding in size and reach, they don’t usually think this means that more people will receive Social Security and Medicare because the population is growing older or that Medicare will cost more because of factors like the aging of the baby boomers and advances in medical technology that improve health and prolong life but at significant cost.

Outside of those demographic and health cost factors, the portrait of a rapidly growing federal behemoth is simply at odds with reality, since costs are shrinking to levels well below their historical averages.

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More About Richard Kogan

Richard Kogan

Richard Kogan rejoined the Center in May 2011 after having served as a Senior Adviser at the Office of Management and Budget since January 2009. During his second tour at the Center, from 2001 to 2009, he served as a Senior Fellow specializing in federal budget issues, including aggregate spending, revenues, surpluses and deficits, and debt. Kogan is also an expert in the congressional and executive budget processes and budget accounting concepts.

Full bio | Blog Archive | Research archive at CBPP.org

7 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. clarence swinney #
    1

    2011
    14,000B total income
    2302 Federal expenditure
    16% of Total Income

    In oecd we rank #2 as Lowest Taxed

    We borrow to let Rich get ultra rich

  2. Ol' Will #
    2

    Maybe none of the following points are true but they are things that I have heard recently:
    1) The real estate market in the DelMarVa area is the most robust in the country. Who is going to live in those houses if not Feral bureaucrats, contractors, and lobbyists?
    2) There are construction cranes all over DC and its environs. Who is going to work in those buildings if not Feral bureaucrats, contractors, and lobbyists
    3) The Congress recently enacted and the President signed into law the budget-busting “health-care” bill, aka “Obama Care”. That is going to help reduce the Feral portion of the GDP?
    4) The CBO makes reports on the numbers it is told to use when making calculations – their job is to justify what Congress wants to do, not set up roadblocks. How can you have such bland confidence in their numbers as exhibited in this article? Oops! I just read Kogan’s bio. He can have such bland confidence in numbers generated by Feral bureaucrats because he’s one of them!

    • MICHAEL ELAM #
      3

      OL WILL:
      Perhaps this testimony does not fit the narrative that you want to reinforce to your sychophants! One way to buttress any argument is to offer a coherent counter argument based on empirical data and reliable sources! Never mind, about facts right? Because facts gets in the way of a theory that is deeply rooted in a testmony! Ol WILL you know the diferences between story telling and testimony? Right? Just in case you don’t, here is a hint; one is based on a impersonal generic argument with very little narraive content; while the other is based on aura of authenticity!

  3. progrowth liberal #
    4

    That spending less Social Security and Medicare will to a level below the 1962-2011 average isn’t exactly convincing given the decline in this ratio from 1962 to 1998. We know defense spending/GDP was high back in 1962 and was much lower in 1998. I think it would be more convincing if you either: (a) did this sine defense spending; or (b) looked at the 2022 projection (10.8%) in comparison to the pre-recession Bush43 years. Of course, your ratio was only 10% during Clinton’s 2nd term mainly because defenses/GDP was so low.

  4. Richard Hattwick #
    5

    Well done and very timely! Keep this up and give it maximum public exposure.

    I would have loved to see an additional paragraph in which you:
    1.Suggested solutions to the health care spending problem
    2.Suggested solutions to the Social Security problem ( but pointed out that the
    program is projected to be solvent until the mid 1930s
    3.Pointed out the theoretical possibility of the Fed purchasing enough of the
    outstanding public debt to stabilize net interest payments. The explanation
    being that the interest paid to the Fed on its holding of Treasury securities
    is paid back to the Treasury so that there is no net interest cost.
    The point of adding those above considerations is to reinforce your point that the situation is controllable.

    • Jay T #
      6

      Regarding Social Security being solvent until the 2030’s. My understanding is that benefits will continued to be paid out of the trust fund until then at which time it will be a pay in/pay out. Is this incorrect?

    • clarence swinney #
      7

      Social Security solvency easy
      Lift Cap as needed.
      Middle 20% pay 17% of Payroll Tax
      Top 1% pay 4%
      10% take 50% individual income
      Pay 25% of Payroll tax

      Since 1980, we have pampered the rich by borrowing 14,000B istead of asking them to sacrifice.
      10 Billionaires in 1980–51 in 1989 (60% tax cut by ron) hundreds in 2007
      2000-2007 got rich richer and worst job creation since Hoover.
      Tell more of how rich create jobs.
      small businesss create jobs

      How long will american take sucker punches for top 10%???

      No Safety Net=Revolution burnbabyburn in big cities
      clarence swinney



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