Yes, Spending Has Steeply Increased
In his Monday column, “Hey, Small Spender,” columnist Paul Krugman bizarrely denied that federal spending has significantly expanded over the past two years, asserting that “there never was a big expansion of government spending” and “the big government expansion everyone talks about never happened.”
Yet for all his talk about a “fact-free” disinformation campaign, Krugman provides no data on total federal spending. This may be because all official budget data reveal a different story. According to President Obama’s own Office of Management and Budget — the keepers of the official data on government spending — federal spending has just finished its largest two-year surge in nearly 60 years, leaping from 20.7 percent of the economy to 25.4 percent (see Table 1.2 here), the highest spending level in American history outside of World War II.
Overall, Washington is spending 23 percent more today than it did two years ago — quite a stunning increase given the concern about deficits and fiscal austerity other nations are embarking on. The Congressional Budget Office and the Treasury Department show similar figures. So where are the facts, one wonders, to support Krugman’s claim that the federal government has not significantly expanded?
He begins his argument by stating that most spending increases have been concentrated in social spending and financial bailouts rather than government employment, direct government purchases, or the creation of new government programs. This is a non sequitur. The composition of a federal spending increase — whether it goes towards Medicaid, direct purchases of fighter jets, state bailouts, new federal employees, or new government programs — isn’t the same as how much federal spending has increased.
The broader purpose of Krugman’s column is to rehabilitate the outdated myth that government can spend its way to job growth and prosperity. Washington’s massive spending spree has, by any objective standard, failed to create jobs. So Krugman simply denies that this spending ever happened, despite reams of official evidence to the contrary. Furthermore, the type of spending that Krugman concedes jumped — unemployment and social spending — is among the most stimulative according to his Keynesian economic theories, yet unemployment has not even responded minimally. This spending’s complete failure to create jobs should provide one more nail in the Keynesian coffin.
Krugman can argue that the historic surge of spending and deficits since 2008 is too small for his taste. But his claim that “there never was a big expansion of government spending” just doesn’t add up.
— Brian Riedl is Grover M. Hermann fellow in federal budgetary affairs at the Heritage Foundation.