Tuesday, December 23, 2008

We're All Socialist Now...

Reported GDP would have been much worse had the government (Federal and State) not stepped in with spending and balance sheet. Per the BEA release:

Real federal government consumption expenditures and gross investment increased 13.8 percent in the third quarter, compared with an increase of 6.6 percent in the second. National defense increased 18.0 percent, compared with an increase of 7.3 percent. Nondefense increased 5.1 percent, compared with an increase of 5.0 percent. Real state and local government consumption expenditures and gross investment increased 1.3 percent, compared with an increase of 2.5 percent.

And this was only through Q3, before trillions of dollars in guarantees and cash were put into the system. As can be seen below, government spending at both the Federal and State level has continued its steady climb over the past 8 years.

Get ready for a spike. How large will it be? Well, according to the UPI:
With government spending accelerating with financial bailout funds and a possible economic stimulus package on the way, government's share of the economy is projected to exceed 25 percent of the nation's $14.4 trillion economy in 2009, USA Today reported Thursday.

The previous record in the post-World War II era was 23.5 percent, set in 1983. In 1943 and 1944, government spending hit 44 percent of the total economy.
Source: BEA


  1. Bush made us socialists! I was expecting something bad from his administration, but not this. Life has a good sense of humor.

  2. Jake, your blue line showing federal spending as a percent of GDP doesn't seem to match data shown in your Sept. 11 post, "Historical U.S. Spending and Revenue as Percent of GDP." In that earlier graph, total federal spending seems to run between 19 and 23.5% over a 36-year period. Am I missing something? --Bill Hine, Peru, ME

  3. The post from 9/11 uses data from the Congressional Budget Office and shows spending 'by the public', which I am assuming is all of the public (i.e. States AND Federal government), while the recent post is from the Bureau of Economic Analysis and breaks down Federal and State / local contribution to GDP. While the two are different measures (one is spending, one is contribution towards production) they are similar, with the big difference being the old chart combines the two (i.e. state / local is ~13% and federal is ~8%, thus the two combined are ~21%).

  4. I think the Federal spending is ignoring SS and Medicare. Federal spending alone is about 20% and has been for about 50 years (give or take a couple percent). Add in state & local and you get to the roughly 35% of GDP controlled by government.