I got involved in a bit of a controversy last year about presidential profligacy.
Some guy named Rex Nutting put together some data on government spending and claimed that Barack Obama was the most frugal President in recent history.
I pointed out that Mr. Nutting’s data left something to be desired because he didn’t adjust the numbers for inflation.
Moreover, most analysts also would remove interest spending from the calculations since Presidents presumably shouldn’t be held responsible for servicing the debt incurred by their predecessors.
But even when you make these adjustments and measure inflation-adjusted “primary spending,” it turns out that Nutting’s main assertion was correct. Obama is the most frugal President in modern times.
When you look at the adjusted numbers, though, Reagan does a lot better, ranking a close second to Obama.
I also included Carter, Nixon, and LBJ in my calculations, though it’s worth noting that none of them got a good score. Indeed, President Johnson even scored below President George W. Bush.
Some of you may be thinking that I made a mistake. What about the pork-filled stimulus? And all the new spending in Obamacare?
Most of the Obamacare spending doesn’t begin until 2014, so that wasn’t a big factor. And I did include the faux stimulus. Indeed, I even adjusted the FY2009 and FY2010 numbers so that all of stimulus spending that took place in Bush’s last fiscal year was credited to Obama.
So does this mean Obama is a closet conservative, as my misguided buddy Bruce Bartlett has asserted?
Not exactly. Five days after my first post, I did some more calculations and explained that Obama was the undeserved beneficiary of the quirky way that bailouts and related items are measured in the budget.
It turns out that Obama supposed frugality is largely the result of how TARP is measured in the federal budget. To put it simply, TARP pushed spending up in Bush’s final fiscal year (FY2009, which began October 1, 2008) and then repayments from the banks (which count as “negative spending”) artificially reduced spending in subsequent years.
And when I removed TARP and other bailouts from the equation, Obama plummeted in the rankings. Instead of first place, he was second-to-last, beating only LBJ.
But this isn’t the end of the story. My analysis last year only looked at the first three years of Obama’s tenure.
We now have the numbers for his fourth year. And if you crank through the numbers (all methodology available upon request), you find that Obama’s numbers improve substantially.
As the table illustrates, inflation-adjusted non-interest spending has grown by only 0.2 percent per year. Those are remarkably good numbers, due in large part to the fact that government spending actually fell in nominal terms last year and is expected to shrink again this year.
We haven’t seen two consecutive years of lower spending since the end of the Korean War!
Republicans can argue, of course, that the Tea Party deserves credit for recent fiscal progress, much as they can claim that Clinton’s relatively good numbers were the result of the GOP sweep in the 1994 elections.
I’ll leave that debate to partisans because I now want to do what I did last year and adjust the numbers for TARP and other bailouts.
In other words, how does Obama rank if you adjust for the transitory distorting impact of what happened during the financial crisis?
Well, as you can see from this final table, Obama’s 2013 numbers are much better than his 2012 numbers. Instead of being in second-to-last place, he’s now in the middle of the pack.
I used a slightly different methodology this year to measure the impact of TARP and related items, so all of the numbers have changed a bit, but Reagan is still the champ and everyone else is the same order other than Obama.
So what does all this mean?
As I constantly remind people, good fiscal policy occurs when the burden of government spending is falling as a share of economic output.
And this happens when policy makers follow my Golden Rule and restrain spending so that it grows slower than the private economy.
That’s actually been happening for the past couple of years. Even after you adjust for the quirks of how TARP repayments get measured.
I’m normally a pessimist, but if advocates of small government can maintain the pressure and get some concessions during the upcoming fights over spending levels for the new fiscal year and/or the debt limit, we may even see progress next year and the year after that.
And if we eventually get a new crop of policymakers who are willing to enact genuine entitlement reform, the United States may avoid the future Greek-style fiscal crisis that is predicted by the BIS, OECD, and IMF.
That would almost be as good as a national championship for the Georgia Bulldogs!
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You didn’t adjust for the portion of the interest spending that occurred during Obama’s tenure, as a result of Obama’s borrowing. I would expect that the borrowing done in the end of Bush’s term would not be apportioned to Obama, however, Obama IS responsible for the borrowing and subsequent interest.
I’m no economist. Not even a dab hand at budgeting, however, I do recognize profligate spending and excessive borrowing to support it. I also am aware that much of the borrowing during Obama’s term was not long term, 30 year, rather a significant portion was short term.
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[…] a remarkable achievement and a sign that the Tea Party has made a difference (though I explained in my post on presidential spending performance that it’s not as impressive as it sounds because of the way TARP money is […]
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Dan, you say that “most analysts also would remove interest spending from the calculations since Presidents presumably shouldn’t be held responsible for servicing the debt incurred by their predecessors.” Hmmm.
Yet the Presidents are spending the money. If you exclude interest, then being consistent means you also have to exclude the money they spend on every program that already exists. Since Obama’s second term has failed to implement virtually anything new, such exclusions would mean that Obama has spent nothing. A brilliant yet fatally flawed conclusion…
Didn’t Ayn Rand say, “When your conclusions don’t make sense, check your premises…”
[…] from Dan Mitchel at his blog- International Liberty- Mirror, Mirror, on the Wall, Barack Obama (Surprisingly) Is Not the Biggest Spender of All. […]
“Mr President, this budget is dead on arrival.” And so began President Reagan’s budget deficits as Tip ONeil spent the dividends of Reagan’s pro-growth tax cut and more. But Mr. Reagan will always associated with deficits that are not his.
President Clinton was convinced by others to sign Mr. Gingrich’s budget against his own wishes. Clinton will forever be associated with the balanced budget crafted by Gingrich’s Congress.
It is still to be seen whether Mr. Obama will be saved from himself by the Republican Congress and bolster the myth of Liberal economic growth and Conservative profligacy.
Brad Ervin
P.S. I’m often ridiculed when I suggest that in a hundred years (that is really a long time in human progress) it is more likely than not that human life expectancy will double. But as you can see below, it is already in the horizon. And who can possibly have the foresight of a 100 year horizon. Nobody. The world our descendants will live in four generations from now will be fantastic and incredibly wealthy beyond our current myopic imagination.
http://online.wsj.com/article/SB10001424127887324324404579042903047362482.html
… but I’m told by the public that I have to feel sorry for them far descendants, living way past a century and being five or perhaps ten times richer than we are, with access to things unobtainable today at any price. Why? Because my greed will leave them with a world 2C warmer of course.
I wish I could share the optimism.
More than current spending Obama is setting the irreversible stage for future spending (to support the mediocre) and less revenue (by burdening the exceptional). In a nutshell, his policies embody a generalized plan to flatten the effort-reward curves.
An additional 5% of the American population has dropped off the active workforce and his policies are aimed at helping them feel ever more comfortable without work. Many more will go home or produce with decreased urgency and enthusiasm as indolence is made a bit more comfortable and exceptionalism more taxing. America will no longer be able to compete with the rest of the world and come out a winner. That is the threshold that is about to be crossed – likely has already been crossed and we are now living the short years of momentum.
It is not a coincidence that the traditionally strong 4-5% economic growth quarters that typically follow recessions are now anemic 2-2.5% peaks. Fooled by HopNChange the majority of the public sees the 2% growth as the long awaited exit from crisis. The public fails to see that these are all manifestations of an overall permanently and irreversibly depressed growth trend line.
Redistribution provides limited temporary relief. The lower growth it causes, compounds and burdens the human growth trendline forever. Had the industrial revolution started in the 1600s as opposed to the 1800s (ie. had capitalism commenced two centuries earlier) we would already be living in a fantastic world, free of cancer and other currently incurable diseases, we would be ten times wealthier per capita, and we would most likely be living over one hundred twenty years, or more, surrounded by things we now cannot even imagine or obtain at any price. Oh but yes, darn, the world would likely be 2C warmer already, so scratch that, we would not be able to live with that, lets go back to our short lived and much-much poorer lives. Thank heavens the industrial revolution and capitalism did not gain a foothold earlier. Let’s go for chemotherapy instead.
It’s like slowly pushing on the accelerator of your car, watching the gas consumption go up and up, till the pedal all the way to the floor. Then you switch feet without letting off and claim that the new foot hasn’t increased the amount of fuel consumption near as much as the first foot even though it’s used way more fuel over all by holding steady at full throttle.
What do these numbers look like correlated to which party is controlling the purse strings in Congress? Yes, the President -signs- budgets, but with no line-item veto…
Your are talking about the rate of increase. The percentage of overall increase in spending means squat when your holding steady at peak output.
By stepping in at the peak of Bush II spending, Obama can at once lay claim to a slow rate of federal spending growth during his administration or even to reducing the deficit, while at the same time he has presided over far higher total spending and record total debt.
Perhaps the OECD is pushing for that kind of financial crisis because it is past waist-deep in the policies, practices, and vision that is helping to drive it. http://www.invisibleserfscollar.com/staring-down-the-sudden-pisa-21st-century-learning-hype-leads-straight-to-planned-welfare-state/
I kept thinking about the OECD wanting to prevent you from hyping tax havens.
Feed the beast even if it destroys us all is the stage we are now at.