Thursday, April 11, 2013

Government spending as a percentage of Gross Domestic Product

This ain't rocket science and I know people are whining about government spending, but, spending isn't that bad.  The problem is that spending exceeds income.  Follow along with this and I think you will understand the issue and why it is happening.

I downloaded the historical table of the Gross Domestic Product from BEA:
Then I downloaded the historical tables for the budget, just the one showing the overview, total tax receipts, total budget outlays and the amount of the deficit.  This table is also the one I use when I want to figure out what percentage the deficit is at.

I pasted the three "total" columns from the budget tables into the GDP table so I could work out the percentage of government spending compared to the GDP.  Remember that the GDP numbers are in billions and the Totals from the budget tables are in millions.  The equation I used is: =((I9*1000000)/((B9*1000000000)/100)) Then I filled the cells down from 1929 to 2012.

The average government spending is 17.69% of the GDP.  Clinton spent an average 18.9, Bush an average of 18.2 and Obama an average of 22.9, 4% more than Clinton and 4.7% more than Bush.

Okay, so Obama is spending more than either Bush or Clinton.  How about collections, tax receipts?

Lets do the same thing, except we'll use the receipts column.  The equation is nearly the same, =((H9*1000000)/((B9*1000000000)/100)) The average amount of taxes collected as a percentage of GDP is 14.8%

To make this simple, both Bush and Clinton collected about 17% of the GDP in taxes.  Obama is only collecting 15%.

So the reason the deficit and the public debt is climbing is because Obama is spending more and collecting less in taxes.

Obama lowered the taxes on the Rich significantly and as a result tax receipts are lower, and the tax burden, percentage of the total amount of tax receipts collected, from the Rich is lower while the tax burden on those making less than 100K has increased.  I addressed that issue in a previous blog.

This blog just underscores how Obama has lowered taxes compared to both Clinton and Bush.

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