Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Washington Had a Spending Problem

Economics / Government Spending Jul 27, 2011 - 05:25 AM GMT

By: Paul_L_Kasriel

Economics

Best Financial Markets Analysis ArticleBut does it have one now and through 2017? In an historical context, no. Consider Chart 1, which shows the rate of growth in the 12-month cumulative amount of total federal outlays from year-ago month. In the 12 months ended June 2011, total federal outlays are up 3.28% from 12 months ended June 2010 -well below the 6.64% median growth in this 12-month cumulative total from December 1955 through June 2011. So, Washington hardly has a spending problem now vs. history.


Chart 1


Although Washington does not seem to have a current spending problem, what about a spending problem going forward? Specifically, if the programs specified in President Obama's February 2011 budget proposal were implemented, how would growth in federal total outlays in an eight-year Obama presidential tenure compare with growth in federal total outlays of other presidents' tenures? To answer this question, I have relied on projections of total federal outlays by the Congressional Budget Office (CBO), the nonpartisan "scorekeeper" of all things fiscal. Chart 2 shows the compound annual rates of growth in total federal expenditures of presidential tenures beginning with the Kennedy-Johnson eight-year tenure. Because an incoming president essentially inherits the budget of his predecessor, I have started the growth clock in the second year of a presidency and kept it running through the first year of the next president.

For example, the clock for federal outlays for President George Walker Bush started with fiscal year 2002 and ran through fiscal year 2009. Although I am not making any predictions about the outcome of the 2012 presidential election, because the CBO has projected federal outlays through what would be another full term for President Obama (and beyond) and because of claims that under President Obama's budget proposal federal spending is a "problem," I have assumed in the growth calculations another full term for President Obama. So, Obama's federal-spending clock starts with fiscal year 2010 and runs through fiscal year 2017. In the presidential terms starting with Kennedy-Johnson, growth in federal total outlays was the fastest under President Carter (JEC) with a four-year compound annual rate of growth of 13.46%. The slowest growth in federal total outlays occurred during President Clinton's (WJC) term with an eight-year compound annual rate of growth of 3.55%. Given actual fiscal year 2010 outlays and CBO projections through 2017 based on President Obama's budget proposal of February 2011, the compound annual rate of growth in federal total outlays in the eight years ended 2017 would be 3.65%, just 10 basis points above that of President Clinton's eight-year presidential tenure.

Chart 2


Lest you think that I rigged the data in favor of President Obama by assigning the total federal outlays in fiscal year 2009 to President George Herbert Walker Bush, the fact is that there were some very large federal outlays, such as those related to TARP in October 2008, that occurred prior to President Obama's inauguration in late January 2009 (see Chart 3). Bear in mind the federal government's fiscal year begins in October and ends the following September.

Chart 3


In part because of the nine consecutive federal budget deficits run starting in fiscal year 2002, cumulating to $4.84 trillion, interest on the federal debt is projected to be the fastest growing major component of federal outlays. Chart 4 shows the compound annual rate of growth of federal outlays excluding interest on the debt by presidential tenure. In the eight years ended fiscal year 2017, federal outlays excluding interest on the debt is projected to grow at a compound annual rate of 2.43%, the slowest, by far, during any presidential tenure starting with the Kennedy-Johnson presidency.

Chart 4


Although when considering CBO and anyone else's projections of federal outlays for the next several decades beyond fiscal 2017, it is correct in saying that Washington does have a spending problem, largely because of baby-boomer entitlement expenditures and interest on the debt. But looking at growth in current federal outlays and projections out through fiscal year 2017, it seems to be hyperbolic to say that Washington currently or in the next six fiscal years has a spending problem.

I appreciate the notion that presidents do not have complete control of the amount of expenditures that occur during their tenures. Although presidents submit budget proposals, Congress authorizes expenditures. So, it might be inappropriate to demarcate growth rates in federal outlays by presidential tenure. The fact (or CBO projection) remains, however, the current growth rate and projected growth rate through fiscal year 2017 in federal outlays are restrained in an historical context.

Paul Kasriel is the recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy

by Paul Kasriel
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Copyright © 2011 Paul Kasriel
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

Paul L. Kasriel Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in