After World War II, the U.S. cut federal government spending dramatically. In 1945, federal government spending as a share of GDP peaked at 31.6%, and by 1948 it was down to 14.4%. Private real GDP (e.g., GDP less government purchases) for the three years 1946, 1947 and 1948 grew at a 7.5% annual rate. So much for the idea that cutting government spending hurts the economy.
The rest of the column is good too.
I liked this:
Addressing the possibility of the GOP-led Congress not voting to raise the debt ceiling, Austan Goolsbee, President Obama’s top economic adviser, histrionically asserted this month: “This is not a game. The debt ceiling is not something to toy with. If we hit the debt ceiling, that’s . . . essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic.”
In context, his comments are more than a bit hypocritical. Over the past four years—including the last two years of the Bush presidency—he and his boss supported every big, misguided spending program they could find, regardless of how much the electorate protested. There wasn’t a dollar that didn’t burn a hole in their pocket.
Government spending should not be used to justify more government spending. That’s bad logic. It’s the logic that folks use for the few years leading up to the point when they call Dave Ramsey for personal finance advice. Fortunately for those people they have Dave Ramsey who will help them face reality and realize the error of their ways.
Austan Goolsbee, who should be the government’s Dave Ramsey, is acting more like the credit card companies. Spend more.
And back to Patrick Ewing’s logic: “Yeah, we make a lot of money, but we spend a lot too.“