What was different in many ways during the thick of the Bush years was that spending continued to increase during the good times, too. In 2001, Bush took the reins of a government that was spending 18.2 percent of the economy. By 2008, government spending equaled 20.8 percent of the economy. It then spiked to 25.2 percent of GDP in 2009 (a budget year for which some expenses were Obama’s but most were Bush’s). That sort of massive divergence is explainable in light of the fiscal crisis and the Bush and Obama administrations’ responses to it. In my my view, those responses were both hysterical, counterproductive, and at least in regard to the auto bailout, illegal. Whether you agree with me on any of that, you should be worried about whether the boost in spending as a percentage of GDP is a temporary blip or the new normal.
Certainly, it should worry all of us that President Obama’s budget proposal released earlier this year envisioned a decade in which the federal government on average spends 22.5 percent of GDP (Table S-1) and that the budget plan passed by the Republican House would have government spending average 20 percent over the same time period. In terms of paying for such levels of spending, each is well above the historical average of tax receipts since 1950. In fact, the GOP plan even estimates tax revenue over the next 10 years at just 18.3 percent of GDP, ensuring more debt and deficits (Table S-1). And the GOP is supposed to be the party of budget hawks, right?