Reader Brett Borowski points me to this little presentation:
In the video above, the commentators are bowled over by the fact that government spending in 2010 is going to leap to 40% of the country's gross domestic product. "OMG! Socialism!" they cry.
I'm not going to quibble with the numbers — if they are off, I suspect that they are not far off. There's no question that this is a massive stimulus package, and that it will create large deficits. Nobody disputes that.
But there are a couple of things to keep in mind when considering data like this:
(1) Government spending as a percentage of GDP is certainly one way to look at the stimulus package, but it is important to keep in mind that GDP isn't a constant. GDP is going DOWN and expected to go down significantly next year. So even if there was no stimulus package at all, and the government spent as much in the coming years as it did in the past few years, there would still be a spike of several percentage points.
(2) 39.9% is high. But it doesn't mean "socialism". Look at all the countries that have greater than 40% spending as a percentage of their GDP (2007 data):
|Country||GE as % GDP|
|11. Czech Republic||58.8|
|12. Sao Tome||58.3|
|31. Cyprus (no Turk-adm)||52.6|
|51. New Zealand||46.6|
|55. Papua New Guinea||44.9|
|65. West Bank/Gaza||43.4|
|71. Saudi Arabia||40.4|
Looks like a hodge-podge of all different kinds of countries and economic systems.
(3) The video closes with the announcer saying "our nation is being taken away… and perhaps forever". They call the government spending on this stimulus package "unprecedented".
Dudes…. get a grip.
Astute observers may wonder why they start their analysis in the year 1947. I'll tell you why. They don't want you to think about the years prior.
Hmmm. I wonder why.
Government Spending As A Percentage of GDP: 1940-2004
The above chart shows the same data: government spending as a result of GDP. It is plotted from data derived from the same source, the OMB.
One of the memes that conservatives like to spout is this: FDR's spending programs didn't pull us out of the Great Depression, World War II did. Okay. Now they have to eat their words. It was the spending of World War II that pulled us out. In 1943 and 1944, government expenditures were 43.6% of GDP, higher than the 39.9% that is projected in 2010 under the stimulus plan.
And then what happened after WWII? Was our country "changed forever"? Did we become socialist? Hardly.
The bottom line: yes, it is a massive spending package. But if what we're facing is comparable to the Great Depression — and most economists think it is — then the government needs to inject as much money into it (as a percentage of GDP) as we did in Roosevelt era. And as for the deficits? We've had them before (especially after WWII). We can get out of them again.