Government Expansion and That Damned Denominator

Krugman has another frustration post, where he has to complain about "the claim that Obama has presided over a vast expansion of government — a claim backed not by describing any specific programs, but by pointing to the share of federal spending in GDP."

The perceptive reader already will know where this is heading.

Well, part of the answer is that the ratio is up because the denominator is down. According to CBO estimates, in fiscal 2010 the economy operated about 7 percent below potential. This means that even if what the government was doing hadn’t changed, the federal spending share of GDP would have risen by 1.4 percentage points.

Then, look inside the budget data (pdf), specifically at Table E-10. You’ll see a surge in spending on “income security”; that’s basically unemployment insurance, food stamps, and similar items. In other words, spending on safety-net programs is up because the economy is depressed, and more people are falling into the safety net.

Evidently, PK can also do math.  He's calculated how much of the approximately 4% rise in Fed Spending/GDP is due to the main contributing factors.  Here is his pie chart.  (Mmmm -- pie!)

He concludes:

What’s in that “other” category? Some of it is stimulus spending. Some of it is the leading wave of the baby boomers, who are starting to collect Social Security and enter Medicare. Some of it is rising health care costs.

What isn’t there, no way, nohow, is a massive expansion of government, which is a figment of the right wing’s imagination.