Government Expenditure Growth

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By Karl Smith, Contributor Matt Yglesias writes: If you believe that restraining government spending should supercharge private sector economic activity, then you ought to know that since 2010 we’ve been living through a nearly unprecedented level of public sector spending restraint. Counterfactuals are, of course, hard. Perhaps private sector growth would have been even weaker had public sector spending risen at a more normal level. But an unusually low level of spending growth isn’t a policy we might try in the future, it’s a policy that we’re trying right now and have been trying for the past few years. That seems correct though, the graph he has accompanying it seems to just show federal expenditures. We can look at the growth rate of all expenditures directly Now, of course growth rates were higher in the past in part because of higher inflation. If we use “real government consumption and investment” we get the resources used in government production which doesn’t count transfer payments. So, we can try deflating total expenditures by the CPI. We can pull into to 1980 to get rid of some of the previous volatility caused mostly by war. And, of course I like to use a bar chart with the growth rates centered roughly around trend, get a since of how much total growth is sloshing about the trend. So far, not as big a divot in spending as from the 90s, but there is likely still a fair bit of below trend spending growth to come.
Source: FULL ARTICLE at Forbes Latest

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