Real Data and the Budget Debate; What Does Government Really Ask of the Economy?
This week, President Clinton proposed spending more than $1.5 trillion in the fiscal year beginning Oct. 1 - an amount equal to 21.6 percent of what the administration forecasts the nation's gross domestic product will be.</br></br>That would be the smallest the government would be in relation to the economy since 1979. It hit a post-World War II record of 24.4 percent in 1983 and has since declined to 22.3 percent.</br></br>However, the chart at the right shows another way to measure the government's demands on the economy: How much it spends for goods and services that it itself consumes and invests.</br></br>By this measure, the size of government in the current fiscal year will be about 6.7 percent of GDP, the smallest share since 1948. Under the proposed budget, it is slated to fall to 6.4 percent next year.</br></br>What the chart shows is that the bulk of federal spending involves transfer payments of various kinds rather than consumption of part of the nation's production. That means that the recipients of the transfers - people, institutions and other levels of government - rather than the federal government actually spend the money buying goods and services.