'Government Is Too Big': What Do You Mean By 'Government' and 'Too Big'?

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James Kwak has done a real service to the debate about federal spending with these two columns. His thesis is pretty simple. When we talk about "the federal government," we're talking about a complex multi-variable entity, not a single thing with a single budget performing a single function. Read them both.

Here's a graph to serve as chaser to those shots. The St. Louis Federal Reserve breaks down total spending from 1950 to 2010 into five parts: Defense, interest on public debt (IPD), Social Security and Medicare (SSM), other payments to individuals (OPI) like unemployment benefits, and other federal expenditures (OFE) like the education department. The categories are still quite broad, but they give you a sense of where federal spending has expanded and declined in the last 60 years.

In a sentence: Defense and other federal expenditures have declined from 16 to 6 percent and Social Security, Medicare and other payments to individuals have increased from 6 to just shy of 16 percent.


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This graph doesn't have any specific policy implications. If you think Social Security and Medicare are important ways to pool risk for the old and sick, you won't mind that we're spending much more on preserving income security. At the same time, the decline in defense and other federal expenditures also means we're spending less money on investments like roads, ports, education, R&D, and military technology. The bottom line is that over the last 50 years we've spent less on what you could call "government investments" and more on what you could call "government insurance."

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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