PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Federal Government Spending Problem Gets Much Worse  

By at 18 November, 2019, 3:43 pm

by Raymond J. Keating-

The federal budget doesn’t get the attention it deserves. Specifically, while the federal government’s spending problem warrants serious attention and remedies, it seems largely to be ignored.

For the most part, when the federal budget does come up as an issue, it tends to be about the budget deficit. And at $984.4 billion for fiscal year 2019 that ended at the close of September, the deficit certainly does warrant worry.

However, there also is widespread assumption that the budget deficit is caused by “big” or “excessive” tax cuts. In reality, the numbers tell a story of federal spending careening out of control.

On the revenue side of the federal budget, receipts have risen every year since 2009. That is, after revenues took a two-year dive in 2008 and 2009 due to the recession, growth resumed in 2010 and has continued ever since. And that that includes growth in 2018 and 2019 – by a small amount in 2018 and then a notable 4.2 percent increase in 2019 – after the December 2017 tax cut.

Meanwhile, on the spending side, total outlays jumped dramatically from 2008 to 2011. Subsequently, there was some overall spending restraint from 2012 to 2014. But growth resumed in 2015 and thereafter. In fact, the average annual spending increase over these past five years has been a rapid 4.9 percent (keeping in mind that inflation has been very low).

Most striking is the fact that federal outlays jumped by a staggering 8.2 percent in the just-ended 2019 fiscal year.

Indeed, the federal government does not have a problem of too little revenue; instead, it has a major problem of federal spending rising at a frightening pace. And it must be understood that increased federal spending does not help the economy. Instead, economic growth is hindered as resources are drained away from productive ventures in the private sector – whether via taxing or borrowing – and handed over to government to be spent according to political incentives. That’s a recipe for a slow-growth economy.

In recent years, both parties have been spending the taxpayers’ money like drunken politicians. As we head into a major election year, one test of economic sobriety will be whether candidates are pledging to rein in or expand government spending. We’ve already seen the latter in many of the Democrat’s proposals focused an array of issues, including, for example, Medicare-for-All.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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