Three Charts That Show America Doesn’t Have A Spending Problem

House Minority Leader Nancy Pelosi’s (D-CA) claim this weekend that the government doesn’t have a spending problem has been met with typical outrage from Republican politicians (and several members of the Washington media) who have spent the greater part of the last three years arguing that reining in America’s supposed out-of-control government spending would put the country on a more stable economic footing. There is, however, no basis to those claims, as actual evidence points in the opposite direction.

As this chart from Slate’s Matt Yglesias shows, overall government spending has plateaued under President Obama after rising sharply under George W. Bush and during Obama’s first year in office, when the economic recovery act went into effect.

In fact, the reduction in growth of spending under Obama is unprecedented in the last half-century, and government spending under Obama is growing at the slowest rate since Dwight Eisenhower was president:

This reduction in spending, however, is not necessarily a good thing. This chart, flagged by Brian Beutler, highlights how perilous rapid fiscal contraction can be. As Investor’s Business Daily notes, “The federal budget deficit has never fallen as fast as it’s falling now without a coincident recession.” Even during the 1990s, a time of rapid economic expansion and low unemployment, the deficit fell only half as fast as it is scheduled to in 2013. The Congressional Budget Office, meanwhile, estimates that full implementation of the sequester (factored into this 2013 projection) will significantly dampen economic growth:


This chart from the Federal Reserve’s Janet Yellen illustrates the effect of fiscal contraction of economic growth. In previous recessions, government spending has encouraged faster recoveries, and the stimulus initially helped boost this recovery. But the spending cuts that have resulted since 2010 have had the opposite (and a totally predictable) effect, driving down consumption and slowing the recovery:

Despite the hand-wringing from conservatives and media types about the federal debt and deficits, these charts make it clear that America’s problem isn’t that the government is spending too much. Rather, it’s that the government isn’t spending enough. Investments into infrastructure, education, teachers, public workers, and other programs could boost the economy. Instead, Washington has turned its attention to cutting spending, and the results have been dire, even if they are totally predictable to anyone who has read about the plight of the European economy over the last three years.