How Big Government Hurts the Average Joe
During the debt-ceiling debate, President Obama characterized his push for higher taxes and less aggressive budget cuts as being helpful to the middle class. The claim was that failing to raise taxes on high-income earners would place a disproportionate share of the pain on the rest. But it is our record-high government spending, not the failure to raise taxes on the rich, that is the typical American's largest long-term problem.</br></br>Workers do well only when the economy grows at a healthy and consistent pace. The biggest threat to long-term economic growth is government growth of the magnitude that characterized the past two years and that is forecast for our future.</br></br>Our current problems are not a result of acts of nature. They stem from policy choices that dramatically increased the size of the government. In the past two years, the federal budget has grown by a whopping 16%. Importantly, growth in agency budgets other than Defense exceeded that in Defense, despite the surge in Afghanistan. The budget for Health and Human Services, for example, home to Medicare and Medicaid, rose a hefty 22%, as compared with 12% for Defense.</br></br>The sum of 11 other agencies, such as the Departments of Agriculture, Education and Labor, which combined account for more annual spending than Defense, experienced an increase of more than 50% over the two-year period. Some of the budget increases, like those associated with unemployment insurance, should disappear when the economy rebounds, but much of the addition is permanent and is reflected in the president's projected future budget numbers.</br></br>What has the increase bought us? The president would have us believe that but for the stimulus, the economy would have sunk into the next Great Depression. The numbers tell a different story. Estimates of the effect of the stimulus on gross domestic product (GDP) range from zero to three percentage points of GDP. The current recession set GDP back by nine percentage points relative to where it would have been had times been normal.