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Monday, March 14, 2011

Another look at Federal Revenues

In comments here, Tux makes an interesting point about taxation.  In 1950, and again now, Fed Revenues/GDP was/is under 15%.  His point is that the population now expects a lot of government services that weren't expected 60 years ago, but, alas, is unwilling to pay for them.  Good point.  In the 50's and 60's we built most of the interstate highway system.  In the 60's we had the space program.  In the 80's, FWIW, we had Star Wars.  Now, we can barely fix a pot hole, and want to fire teachers and policemen.

Let's put it in economic perspective.  Here is a look at Revenues/GDP since 1930.  (Click image to enlarge.)

The green diamond is 1950.  In the era since 1950, a Rev/GDP value below 15% is atypical.  The 1955 to 2005 average (green line) is 18.0%.  For context, in 1950, revenues were an increasing percentage of a rapidly growing GDP.  Now, revs. are a declining percentage of stagnating GDP.  Big difference.

The brown line traces a 13 year average.  From about 1970 on, it overlays the long average - until now.  Henceforth, it will drop for years, due to an ongoing lousy economy and inadequate taxation.

I've commented before on the differences in economic performance under Dems and Rethugs.  If you need a reminder, it's always better with a Dem in the white house.  Here, I've traced D and R administrations in Red (Rethug) and Blue (Dem.)   The pattern of revenues increasing under Dems and decreasing under Rethugs is striking and consistent.  Until now, of course, with B. Hoover Obama continuing the disastrous tax cut policies of the Shrub regime.  (This is actually quite unfair to the real Hoover, who raised the top tax rate from 25% to 63% in 1932, thus ending the horrible slide of the great Depression and paving the way for the New Deal.)

Here's another look at GDP growth around 1950.

From 1950 to 1960 (one decade) GDP increased by a factor of 1.9, a compounded annual growth rate of 6.625%.

Here is now.

From 1990 to 2010 (two decades) GDP increased by a factor of 2.5, a compounded annual growth rate of 4.75%.   Note, this is almost 2 full percentage points lower than in the post WW II Golden Age.  And to see how badly this is trending, the compounded annual growth rates for the most recent periods are 3.95% since 2000, and 3.125% for the most recent 5 years.

Here's a slightly different way of looking at it.

The five year rate of change for real GDP is expressed as a percent.  The only two bright spots are the Kennedy-Johnson administration, and to a lesser extent, the Clinton administraton.  Reagan's second trm numbers only look good because of the deep dive in the early 80's.  Eyeball a trend line through the whole series, and we are clearly slouching toward zero growth.  Make it per capital, and we'll go negative, and stay there.  Data from http://www.multpl.com/us-gdp-inflation-adjusted/table

I've said before that the American Economy is dying.  This is just one more way to look at the decline and fall of a once great nation - killed by decades of  grotesque fiscal irresponsibly and deliberately anti-Keynesian policy decisions.

1 comment:

Jerry Critter said...

These are interesting graphs. As you noted, the Democrats have tended to increase government revenue and the republicans have tended to decrease federal revenue. Now, it would be interesting to overlay the federal debt on top of the revenue. I suspect you would see revenue decreasing and debt increasing more so for republicans than Democrats.

Or, in other words, I suspect it will show that while republicans reduce government revenue, they do not reduce government spending and thus grow larger deficits.

I call that fiscal irresponsibility.