Spending and Debt by Administration

In violent times, you shouldn't have to sell your soul
In black and white, they really, really ought to know
--Tears For Fears

As election time approaches, both parties are slinging around claims related to spending and debt by various administrations. Both sides, of course, have a vested interest in making the data shine in their particular direction. 'Truth telling' seems to be the buzzword and when it comes to economic data, politicians typically offer half truths at best.

In politically charged environments, the best way to find truth is to examine the evidence yourself. Using data from omb.gov and treasurydirect.gov, I took a look at federal government spending and outlays by four year presidential term since 1900.

Some people argue that the first year of an administration should be omitted or credited to the prior administration because spending done in a president's first year is largely passed by Congress in previous years. True about Congressional bill passage, but some of those spending bills are enacted by incoming presidents who could have vetoed them, or pushed for new legislation in the opposite spending direction. It is also possible that incoming presidents could exacerbate spending programs in motion by pushing for more in the same direction. In short, incoming presidents exert enough control to justify the first year's inclusion in analyses of fiscal accountability.

Let's look at the data:

The first thing to notice is that we've come a long way over the past 100 year relative to spending and debt. Single digit $billions have become double digit $trillions. Term-over-term increases in outlays are simply mind numbing, as are increases in debt that predictably followed (but lagged a decade or two) to fund the spending.

Only two times in the past century have federal outlays actually declined. Both followed large wars and could be seen as outlier periods where spending was being brought back to 'normal.' The Harding/Coolidge era is particularly noteworthy in that it was the only administration that oversaw reductions in both outlays AND debt.

Outside these two periods, spending and debt has always gone up. Always.

Partisans who claim that their party's administrations increase spending or borrowing at a lower rate than the other side are out of luck. Using the post WWII era for comparison, I started with Ike's second term and and calculated the average spending and debt % increases for the 6 Democratic administrations and 9 Republican administrations during this period. The averages favor the Democrats, with average % change in outlays for Democratic admins at 30.9% versus 34.5% for Republicans. But t-tests imply that these differences are nowhere close to statistically significant (p = .67). Same with average % change in debt: 27.2% for Dems, 41.7% for Reps, p = .250.

Now we come to the meat of the matter as it relates to the current political debate. Republicans claim that the Obama administration has an abysmal record regarding spending and debt. On an absolute basis this is certainly true: Obama spending = $14.4T (2nd Bush term = $10.2T), debt = $16.0T (Bush2 = $10.0T). The incremental outlays (+$3.5T) and debt (+6.0T) during the Obama administration are literally historic for a 4 yr presidential term.

However, on a relative basis, Obama increases in spending (+32.6%) are middle of the pack and Obama increases in debt (+59.5%), while on the high side of the range, have been seen before. In fact, the Republican administrations of Reagan and Bush consistently ran up high end increases in debt in the 1980s/early 1990s.

The real problem facing the Obama administration is explaining the spending and debt increases relative to GDP (highlighted in yellow at the bottom right of the table). GDP growth has faltered during this administration at +8.8%. This constitutes a record low for an administration since GDP data collection began in 1930. Combine tepid economic growth with large increases in spending and debt and you get alarmingly high ratios relative to GDP. The Obama administration's outlays:GDP (92.1%) and debt:GDP (102.5%) are both non-wartime records. Research suggests that such ratios portend big problems, and the Obama administration has yet to convincingly justify why such an extreme gamble is prudent.

To be fair, not all of this predicament can be attributed to the Obama administration. Socialistic and militaristic policies, and the spending and borrowing to fuel them, have been escalating for many years.

But this administration has been stepping on the gas instead of the brakes -- with predictable and ominous results.