She writes in the New York Times Magazine.
“We get about 15 cents of every procurement dollar spent by the federal government,” says Stephen Fuller, a professor of public policy at George Mason University and an expert on the region. “There’s great dependence there.” And with dependence comes fragility. About 40 percent of the regional economy, Fuller says, relies on federal spending…
The amorphous war on terror and the creation of the Department of Homeland Security — plus the wars in Afghanistan and Iraq — bloated the country’s spending by about $1 trillion. The contracting dollars that were pumped into the local economy, Fuller says, more than doubled between 2000 and 2010, when it reached $80 billion a year.
However, elsewhere she advocates more deficit spending now to stimulate growth. The most charitable interpretation I can give is that she thinks in terms of “good” spending and “bad” spending on the part of government. The former adds to overall economic growth. The latter just sucks wealth into Washington. The bad spending comes from President Bush and the war on terror. The good spending comes from President Obama and the stimulus.
Some concerns that I have.
1. A lot of the wealth goes to lobbyists for whom the distinction between good spending and bad spending is not meaningful.
2. A lot of the influence on the direction of the spending comes from lobbyists for whom the distinction between good spending and bad spending is not meaningful.
3. The good spending is justified as needed temporarily to boost the economy. But will this temporary spending ever subside? The Keynesian argument for countercyclical government spending seems to get made when the economy gets weak but never when the economy is strong.
4. For that matter, there is also an asymmetry in the argument for more government spending when interest rates are low. I would give this more credibility if those making the argument had ever advocated reducing government spending because interest rates were high.
Of course, my own view is that the evidence that more spending by the federal government benefits the economy as a whole is not compelling. I find it much more believable that such spending benefits Washington.
3. Government spending is considered “public good” using Buchanan’s terms, and thus cannot be constrained. Here, Ch.3/Reason of Rules : “to the extent that a prejudgment has been made to the effect that majoritarian voting rules are more efficient in generating “public good” than are any of the alternative forms of political authority (for example, hereditary monarchy, aristocracy, oligarchy, rule by committee of a single party, or dictatorship by a military junta), any constitutional constraints on the “will of the majority” will tend to be opposed. “
On point three, a. The initial stimulus is, in fact, subsiding (and defecit reduction is taking its place), so why is it unemaginable a second round could?; b a lot of the people arguing for stimulus served in the Clinton administration, and did in fact move towards a budget surplus and a lower ratio of federal spending to gdp when times were good, then opposed spending increases under bush. Seems unfair to say keynsians don’t really want to reign in spending during booms.
I recall lots of folks opposed to the Bush tax cuts. I do not recall anyone opposed to spending. My assessment is that the main reason that the budget did so well is that revenue came in unexpectedly high. Once they saw that they had more revenue, Congress seemed eager to spend.
Federal spending as a percent of GDP fell every year Clinton was President. I think it ultimately fell a couple of a couple percentage points. A lot of that was GDP growth, but real federal spending per capita also fell between 1992 and 2000, though less dramatically, and fell even more if you go back to 1990. The federal government simply spent less per person over the course of the 90’s. The peace dividend was a real thing.
In the present, we just did 2.3 trillion in deficit reduction over the next ten years with 75 percent of it coming from spending cuts.
Then from an international perspective, it happens all the time. For example, UK spending as a percent of GDP plummeted under thatcher and kept plummeting, dropping 13 percentage points over the 80’s and 90’s.
So yeah, there’s no magical political economy problem that makes government grow forever and ever or protects programs, once created, from ever being cut. People like the welfare state. They also like having a productive economy. Lots of countries thread that needle.
And again, in this particular case it is especially silly to say “if we did stimulus we’d never see those programs done away with” when we are seeing a lot of the last stimulus done away with. Good bye, payroll tax break!