The US Government Is Shrinking?


In today’s political climate, the more implausible the claim, the more likely it is to stick. One that seems to be sticking now is that US government today is small by historical standards and constantly shrinking.

Run that one by the man on the street — looted by the tax man, harassed by police, hounded by regulators — and he will scoff. Now comes the highbrow journalist with a nuanced view to correct him, citing all kinds of complex data.

The highbrow in this case is Catherine Rampell, writing in The New York Times. Her claim seems apodictically certain. “Government has been shrinking steadily for two years,” she says, “and compared to the size of the overall economy, government is actually slightly smaller today than it has been on average in the postwar era.”

Huh? Well, she provides data of “the percentage change in total government spending and investment” as compared with the change in the GDP. She shows GDP rises and government falls. Wow, amazing.

Not so fast. You can always know that when people claim that government is small, it will always appear small by comparison to the GDP, which is to say that anything looks small by comparison to anything (in the words of economist Roger Garrison).

Moreover, it is a peculiar presumption that government should always grow in proportion to the wealth of society (presuming that GDP does measure that). Why? If government is providing essential and minimal functions only, it should get smaller in proportion to economic growth. Should the thief keep coming back for more when his victim grows wealthier?

Also, shrinking by comparison to everything else doesn’t mean that it literally gets smaller. It should only constitute a smaller portion of the total.

But that’s only the beginning of Rampell’s statistical antics. If you compare federal government spending as a percentage of GDP, it comes in at 24.3%, which is the highest in postwar history. In fact, it is the same as 1942, the year American troops landed in Europe.

So what is she talking about? Is she just making stuff up? Not exactly. She carefully says that she is looking at “the percentage change in total government spending and investment.” More precisely, she is examining something called “government consumption expenditures and total investment,” one of the ways that you can slice and dice national income accounting.

This is the figure among many options that best makes her case. Piles of data had to be thrown in the trash can to generate the result she wanted.

As AmosWEB points out, this figure is the only one that completely excludes transfer payments, which are defined (arbitrarily) as not investment and not consumption, and includes all those things that (arbitrarily) fall into a specific category.

It’s a bit like saying that a giraffe is a horse if you exclude the neck.

Rampell even took the manipulation one step further to look at quarterly change in the data, and not the actual figure. Therefore, if government spends a trillion on a stimulus now and that stimulus runs out next year, it would seem to show a crash in spending. Surprise, that’s exactly what happened!

Despite her rhetoric, then, we can see that she had to engage in three levels of distortion to come up with the claim that government is shrinking.

Let’s say that we look at what most normal people would consider government spending, by which I mean… the dollar figures on how much government actually spends. And let’s add a column on debt so we can see the total unfulfilled commitments in the year in question too. There is nothing fancy pants here, just the raw truth, year by year.

Government Shrinkage

Now, I ask you: Does this look like steady shrinking to you?

In other words, the man of the street is exactly right. Think about these numbers when you hear pundits and politicians over the next months tell you how dramatically government is shrinking.

Of course, spending alone doesn’t measure government size. If your front door is being broken down by feds, if you are jailed for violating regulations, if you are prevented from starting a business or if you can’t hire new workers because of the high costs, government is effectively totalitarian from your point of view.

In the last 10 years, this is the largest change we’ve seen, from big government to police state. In the end, this is a change that no data set can quite capture.


Jeffrey Tucker
for The Daily Reckoning Australia

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3 Comments on "The US Government Is Shrinking?"

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4 years 2 months ago

Sir, I hope you are aware that 3.456 is less than 3.757? She war referring to two years. Even compared to 2008, the spending increase is less than any three-year span of the Bush administration.

Admittedly much of this is about the expiration of Bush-initiated stimulus and withdrawal of troops from Bush-initiated war. Vote republican for a return to “deficits don’t matter.”

The explosion of debt during Obama is not about rising spending, but collapsing tax collection.

truth and integrity
truth and integrity
4 years 2 months ago

Yes RR and debt increased by $3trillion or 25% over 2 years also to pay for government employees and other wastes.
The increase cost of debt to keep the employment figures looking not so bad! (increase government)
Also check the debt clock showing small business (the life blood of an economy) being stripped to finance corporations! (through debt and big government)

Ben K
Ben K
4 years 2 months ago
You use straw-man arguments to bash her article – I am disappointed in your take on this. Yes her historical claims are off base if you disagree with measurement as % of GDP (and that alone is not a simple as you make out – there are arguments for both sides there), but the claim that government has shrunk for the last two years is dead on. I read an earlier article elsewhere making a similar point, but focusing on Obama’s spending policy vs the perceived reality. Here, you have to admit there is a massive disparity between the common… Read more »
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