Government spending v. economic growth
Cato's Steve Hanke has a great article today detailing the impact of federal spending policies on the nation's economic performance (although Rothbard and I would diverge somewhat from his outlook on monetary policy). Hanke demonstrates how the historical evidence confirms that government spending restraint is directly related to economic growth - to the chagrin of Washington's growing population of Keynesian apologists.
Many WriteOnNevada readers, however, might be most interested in the statistics Hanke provides on different presidential administrations' record on fiscal discipline. Hanke examines federal spending as a percentage of GDP and shows how that percentage has changed under each post-war administration. I've reproduced the results below:
1. Clinton -3.9
2. Eisenhower -1.6
3. Nixon -0.9
4. Reagan -0.4
5. Carter 0.3
6. Kennedy/Johnson 0.6
7. H.W. Bush 0.8
8. Nixon/Ford 1.8
9. Johnson 2.0
10. W. Bush 2.5
11. Obama 3.1
From this table, one might conclude that the Clinton Administration presided over the most fiscally conservative period of the post-war era, while the Bush and Obama Administrations have been the most frivolous. Of course, there are a number external factors that affected each administration. The Clinton Administration, for instance, benefitted from the end of the Cold War and the resulting reduction in military spending facilitated by that event, among other factors.
Not coincident to the spending policies enacted by each administration, however, is the record of economic growth. The economy grew rapidly and living standards skyrocketed during the 1990s whereas the record of economic performance under the administrations that oversaw an increase in federal spending, as a percentage of GDP, has been dismal.
Hayek wins again.
