Government growth and spending

During the first two years of the Obama administration, federal spending soared some 84 percent. This was no easy feat, as it was already at historic levels. “President Bush increased government spending more than any of the six presidents preceding him,” economist Veronique de Rugy notes in a working paper. Bush’s final budget posted a $438 billion deficit, the largest in history.

Yet the Obama administration managed to more than double that debt load in its first year alone. The 2009 budget year deficit totaled $1.42 trillion. In 2010, the deficit was slightly less, but still reached $1.29 trillion. It’s projected to top the $1 trillion mark each of the next two fiscal years. These unsustainable spending and debt levels are one reason voters opted for a Republican House of Representatives in the 2010 midterm elections.

Early in 2011, the Republican Study Committee offered a plan that would slash federal spending by $2.5 trillion over the next decade, primarily by returning to 2008 spending levels. On a larger scale, Rep. Paul Ryan, chair of the House Budget Committee, has drafted a roadmap which he says, “focuses government on its proper role; it restrains government spending, and thus limits the size of government itself; it rejuvenates the vibrant market economy that made America the envy of the world; and it restores an American character rooted in individual initiative, entrepreneurship, and opportunity.”

The non-partisan Congressional Budget Office examined Ryan’s plan and found it could eventually eliminate the federal deficit.

For a look at where we’re headed, check out the U.S. Debt Clock and its snapshot of the nation’s balance sheet. By the government’s own accounting, the net present value of unfunded liabilities is now some $100 trillion. This is greater than the net worth of the entire economy, and is almost 10 times the value of every product and service produced annually in the U.S.

Economic Freedom and Prosperity

All this leads to the big question: What should the role of government be in a society?

Across the globe and across time, some civilizations have enjoyed genuine and lasting prosperity while others have languished under persistent, grinding poverty. Thorough study -- reflected in hundreds of peer-reviewed articles -- confirms it is a society’s economic freedom that correlates consistently with its prosperity. Using a holistic assessment of not only material wealth but also life expectancy, education, air quality, access to clean water, and other elements of well-being, economically free countries tend to be much more prosperous than their less-free counterparts. (Read more here).

This is highlighted every year by The Heritage Foundation’s Index of Economic Freedom, which presents a snapshot of freedom in economies around the globe. Not surprisingly, America’s score has declined these past two years, and in 2011 our economy is rated “Mostly Free” instead of “Free.” We’re now ranked ninth in the world in economic freedom. “The government’s recent spending spree has led to fragile business confidence and crushing public debt,” the Index editors write. “Interventionist responses to the economic slowdown have eroded economic freedom and long-term competitiveness.”

Economically free countries have smaller, less intrusive governments which spend less, tax less and regulate selectively. They have legal systems that protect the rule of law and private property, and they have monetary policies that allow for stable currencies.

Economic Freedom and Government Size

Limited government spending is a key dimension of economic freedom and for much of its history, the United States has been a place where government taxed little and spent prudently. Unfortunately, that is no longer true. For the last several decades -- irrespective of which political party was in power -- the federal government has rapidly and continuously expanded.

State governments have also grown at a breathtaking pace. Across the country, many are facing potential collapse. In 2011 Illinois opted for a 66 percent tax increase to try to ease its budget crisis. Meanwhile, Democratic governors are promising massive spending cuts in New York and California to close their states’ budget deficits.

Recovering from the “Great Recession of 2008”

Of course, many blame the jump in spending on our nation’s deep recession. While economists and pundits offer a variety of theories about what prompted the global financial crisis, we think this essay provides a common sense analysis of the causes and the cures. There are also links in the sidebar at right, as well as this perspective written by Charles Koch, which offers food for thought.

The website, Bankrupting America, explores the policies hindering economic opportunity and growth in America. A project of Public Notice, a nonpartisan nonprofit organization, Bankrupting America focuses on the causes of the country’s current economic downturn and the future implications of careless policy making.

Because government spending threatens the prosperity of every American, urgent reform is needed now. Unfortunately, in response to the current recession, the Federal government has dramatically quickened the pace at which it spends, as this three-minute video illustrates.