Blaming Big Government for the Debt

It's easy too look at the enormous growth in public spending over the last two years and conclude that the White House is slow-walking the country toward a socialist takeover that dramatically changes the obligations of the federal government. Newt Gingrich makes this charge about every other week. Jonah Goldberg gets into it, too. It's a popular and bankable claim.

But what exactly is driving up government spending? It's not new laws. It's old laws. To self-quote a bit, much of the changes to our short-term budget come from mandatory increases as a result of the recession -- like unemployment benefits and food stamps -- and the bailouts passed under Bush and administered by Obama, like TARP and the Fannie/Freddie rescues.The largest stimulus programs aren't for new services, but for helping states pay for old services, like the Medicaid Federal Medical Assistance Percentage (FMAP) and the State Fiscal Stabilization Fund (SFSF). In short, our government is growing because of what past presidents have promised and voters have consistently supported at the polls: Medicare, Medicaid, Social Security, the Federal Unemployment Tax Act.

And what about the debt? The IMF surveys the G20 and puts together these two graphs on what's behind the short-term deficits and the long-term structural deficits.


Health spending v Pensions.png
Broadly speaking, the short-term deficits overwhelmingly come from lost revenue and mandatory fiscal support for the recession. The long-term deficits overwhelmingly come from medical inflation for aging population. Neither involve new laws.

This is not to go all Homer on national policymakers and claim that budgeting is all a matter of fate, and choices don't matter, and so on. Of course choices matter. Countries can choose to ration health care, or slash pensions. They can choose to raise taxes or cut spending dramatically. They can choose to rescind promises to old folks because the tax base can't support the guarantees. But these would be decisions to change old laws that voters have overwhelmingly supported, certainly in the United States.

Big Government isn't a choice Obama made sometime in 2009 and sprung on Americans. It's a choice we all made -- together and repeatedly. The next generation's political and policy challenge will be figuring out a way to live with it.