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The graph above shows Federal spending (in blue) and State and Local spending (in red). The gray shaded area is the NBER's dating of the last recession. The numbers are NOT adjusted for inflation Federal spending is still than 30% higher than it was in January of 2007. State and Local spending is still around 12% higher than it was in January 2007. Is this really austerity? Can government spending really never come down? Isn't it over 2 years since the end of the recession? Aren't all the people talking about fiscal drag and government spending cuts slowing down the recovery just arguing from accounting identities like they yell at the right wingers for doing? Can we really run a trillion dollar deficit and bemoan austerity simultaneously?
Labels: economic growth, epistemic closure is everywhere, fiscal policy
I made a graph similar to yours, but (since I couldn't figure out how to turn them into real dollars) put in the CPI and normalized everything to 100 in 2007. You see state expenditures tracking the CPI pretty closely in recent years and federal expenditures exploding, as in your graph.Spending won't come down. Does that mean our only hope is to have very strong GDP growth for many years, combined with "fiscal restraint" sufficient to grow spending a lot slower than GDP?
"Can we really run a trillion dollar deficit and bemoan austerity simultaneously?"Of course we can -- as long as no serious economists show up and spoil the party.Remember what the Queen told Alice when she chose not to believe impossible things.Queen: "When I was your age, I always did it for half-an-hour a day," the Queen smiled. "Why, sometimes I've believed as many as six impossible things before breakfast."Politicians understand the Queen, the rest of us simply need to keep the faith."Every time a child says, 'I don't believe in fairies,' there is a fairy somewhere that falls down dead."-- Peter Pan
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