Investor’s Business Daily, responding to an article appearing in several McClatchy Company newspapers, argues that President Bush isn’t a big spender because outlays as a share of GDP are not that different today that they were during the Clinton years. But this analysis has two shortcomings:
First, it looks at average spending as a share of GDP over an administration’s total tenure. What matters more is that federal spending was down to just a bit more than 18 percent of GDP when President Clinton left office. It’s now more than 20 percent of GDP today.
More important, spending as a share of GDP involves both a numerator (government outlays) and a denominator (economic output). But consider what has happened to federal spending: by that measure, Bush unambiguously has been fiscally irresponsible.
This doesn’t mean that spending as a share of GDP is not an important measure. Indeed, IBD is correct to explain that it is the most appropriate measure of the overall burden of government relative to activity in the productive sector of the economy.
What does this say about the Bush years? Well, the good news is that the American economy has enjoyed strong growth since the supply-side 2003 tax rate reductions. The bad news is that a significant chunk of that new output has been diverted to government coffers.
The McClatchy piece says discretionary spending under Bush has risen an inflation-adjusted 5.3% in his first six years, outstripping the 4.6% under Johnson — and way above President Reagan’s meager 1.9%. By “almost any yardstick,” the article continues, Bush “generally exceeds the spending of his predecessors.” Any yardstick,” that is, except the most important of all — spending as a share of GDP. On this, Bush is actually lower than most of his predecessors. Spending as a share of GDP is the most important measure of the size of government, since it measures what government actually takes from the national economy.