An Historical Look at the Budget

Here’s a look at the Federal government’s receipts (red) and outlays (blue) as a percent of GDP. I got these numbers from the president’s budget. The numbers after 2009 are forecasts.
I broke the outlays into defense (green) and non-defense (black).

A few observations.
It’s stunning how far defense spending has fallen. In 1958, over 10% of the economy went to the Pentagon and that was for a peacetime military. Before 9/11, it had dropped to just 3%. Even with two wars, we’re only back to 4.6% which is less than what Reagan defense buildup wanted to build up from. I wouldn’t be surprised to see us under 3% in another 10 years.
From 1951 through 2008, budget receipts (the red line) averaged slightly over 18%, but what’s fascinating is how consistent that was. For the entire time period, the standard deviation was under 1%. Perhaps we ought to take nearly six decades of data as a hint, and aim to raise that much every year. Obama plans to keep up within the historical norm. His forecast goes to 18.6% by 2014 and 19% by 2015. Of course, he may be long gone by then.
From 1975 through 2008, nondefense spending made up an average of 16.25% of GDP with a standard deviation of less than 0.7%. But this is where Obama really becomes an outlier. This year’s non-defense spending will jump to 20.1% of GDP which is twice its share of 45 years ago.

Posted by Eddy Elfenbein on February 2nd, 2010 at 5:18 pm

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