Public Priorities, the Federal Government and a 1966 Data Snapshot of America

House Minority Leader Nancy Pelosi went on the offensive this week, arguing that “the Republican Party in the Congress is dominated by anti-government ideologues, and they will forever, foever want to reduce taxes on special interests, make cuts in the education of our children and in the care of our seniors and the rest because they do not believe in government.  

Both the Pew Research Center (above) and Center for American Progress (below) released new data this week that tracks public realities about American attitudes on the federal deficit and a now and then view of America in 1966, the last time the size of the federal government was 18% of gross domestic product.

Republicans hope to pass a formal limit on the size of the federal government, arguing that the Obama Administration wants to make America a socialist country like Sweden.

Economics21 points out that when one looks at the total package of federal, state and local taxes — coupled with the cost of health care insurance which has been privatized in America — total spending put the US ABOVE Sweden’s projected 46% of GDP in 2016. 

E21 also argues that there are major assumptions in the recent Congressional Budget Office Outlook that estimates that annual deficits will decline to a manageable 2.4% of GDP in 2015 ($430 billion), along with a projected future decline in federal debt as a percentage of GDP. 

Unfortunately, the CBO report is highly misleading on this score for three main reasons: (1) the report assumes the real GDP growth magically accelerates to a 4.4% annual rate in 2015 and averages 3.8% for the four years between 2014 and 2017; (2) the report assumes that interest expense remains historically low despite the acceleration in growth, which makes debt fall relative to the size of the economy; and (3) since costs of mandatory spending continue to accelerate throughout the budget window, a 10-year snapshot artificially reduces the scale of the required adjustment since policies necessary to stabilize debt ratios in 2023 are insufficient to stabilize debt ratios in 2025, let alone 2035.