Rooted in Reason: Nurturing the Seeds of Liberty


Really Following the Money by maliab
February 23, 2011, 7:59 pm
Filed under: Economy, Hawaii Sunshine | Tags: , ,

By Malia Hill

Over at Hawaii Sunshine, we’re committed to following the money by tracking government spending.  We believe that this kind of transparency brings accountability to government and creates an active and informed citizenry.  But as Jeff Bell points out in the Weekly Standard, when it comes to following the money as part of creating a healthy economy, we need to remember that sound fiscal policy may start with attention to spending, but that’s only the beginning.  Bell’s article (written from a conservative perspective) is well worth reading in its entirety for any Tea Party fiscal conservatives interested in creating a full strategy for long-term economic growth:

Few conservatives would deny the role of bloated government as a drag on economic growth in the long term. But when it comes to the recent “severe symptoms”—“huge deficits, .  .  . high unemployment, and woefully inadequate job creation”—there is zero correlation between growth in government and the nosedive our economy entered in the fall of 2007.

Taking the five fiscal years prior to the 2007-09 recession—fiscal 2003 through 2007—federal spending as a percentage share of Gross Domestic Product was as follows: 19.7, 19.6, 19.9, 20.1, and 19.6. It’s not simply that the stability of these numbers belies the notion of a pre-recession trend. They all round to 20 percent, which is precisely the goal of several of the GOP’s statutory spending-limit proposals.

A goal of 20 percent may look ambitious when contrasted with Obama-era (fiscal 2009 through 2011) GDP shares of 24.7, 25.4, and 25.1 percent. But offering a return to Bush-era GDP shares as a cure for the economic meltdown—a meltdown that began at precisely those spending levels during the Bush administration—doesn’t pass the laugh test.

Johnson is correct in seeing federal deficits more as a symptom than a cause of hard times. But many other Republicans speak of the size of the deficit as if this were a central part of what had halted the U.S. economy in its tracks. But in the four fiscal years prior to the recession, the federal deficit declined every year, shrinking from 3.5 percent to 1.2 percent as a share of GDP, a Bush-era decline of nearly two-thirds. These deficit declines would no doubt seem plausible to a liberal like Paul Krugman as a harbinger of economic collapse. They make a poor talking point for Republicans seeking a reduction in government.

Indeed, the true outrage of the Democratic ascendancy of 2009-10 is precisely Krugmania—the hyper-Keynesian belief that ever more federal spending is an answer to high unemployment or a collapse in private liquidity. The failure of Krugmania helped swell the Tea Party, as well as enhancing the Tea Party goal of a return to the more limited government envisioned by the Founders. In this sense it was a (rather costly) learning experience for American politics.

 

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