downsize government

Larry Summers Conflates Economics and Politics on Shrinking Government

Former Treasury Secretary Larry Summers claimed at a Wednesday lunch that the “Republican vow to significantly reduce the size of government is a foolish pipe dream” due to “structural economic realities.”

What are these realities, according to Summers?

  1. An aging population will mean upward pressure on entitlement spending on unchanged policy.
  2. The rise in inequality requires government spending to “ameliorate” the consequences.
  3. Prices tend to rise relatively quickly in service sectors such as education and healthcare, necessitating more government spending.
  4. Rising national security threats and increased military spending by geopolitical foes will necessitate more U.S. military spending too.

Where to start?

Summers is right that, on unchanged policies, government spending would balloon due to aging.

The Congressional Budget Office projects spending on Social Security would rise from 4.9 to 6.3 percent over the next 30 years, whilst Medicare spending would nearly double from 3.1 percent of GDP to 6.1 percent. The impact of all that extra spending, even as non-Social Security and healthcare spending is projected to fall from 8.9 percent of GDP to 7.6 percent, is a growing budget deficit and accumulated debt. This would raise net debt interest payments further, such that by 2047 the U.S. budget deficit stood at (a completely unsustainable) 9.8 percent of GDP.

These long-term projections come with all the usual caveats. They use assumptions about the likely path of productivity growth in the economy, population growth, and the extent of labor force participation. Nevertheless, this analysis does highlight the scale of the contingent liabilities embedded in current policy.

Funding the FBI

On Fox News last night, Megyn Kelly agreed with her guest James Kallstrom that the FBI needs a larger budget. The horrific attack in Orlando has raised the issue of whether the FBI has sufficient resources to investigate potential terrorists.

I don’t know how large the FBI budget should be. The agency does fill a lot of crucial roles, including tackling never-ending corruption in federal, state, and local governments.

Largest Federal Government Agencies

We’ve updated the charting tool at www.downsizinggovernment.org/charts with the latest data. You can plot spending on hundreds of federal agencies and programs in constant, or inflation-adjusted, dollars. The charts cover 1970 to 2016.

Which are the largest federal government agencies, and how much have they grown? The following series of seven charts captured from the charting tool shows the 21 largest agencies in order by size.

The first chart shows that Defense, Health and Human Services, and the Social Security Administration used to vie for top spot as the largest agency. But Defense is now being left in the dust, as the latter two entitlement-dispensing agencies gobble up ever more tax dollars.

Biden’s Fatal Conceit

The White House’s misbegotten “Summer of Recovery” continued today with the release of another administration “analysis” that purportedly demonstrates the stimulus’s success in “transforming” the economy.

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