Lately, there has been some controversy about the growth of spending under Barack Obama. It began on May 22 with a column by Rex Nutting of MarketWatch, which concluded that the rate of growth of federal spending under Obama has actually been trivial compared to the last 4 presidents.
According to Nutting’s calculations, spending has grown only 1.4 percent per year under Obama – one-fifth the rate under Ronald Reagan and George W. Bush. Following is a chart accompanying the article.
There has been a considerable amount of debate about Nutting’s calculations, which fly in the face of Republican dogma. Much involves technical accounting issues, such as how to allocate spending during fiscal year 2009. This is important because fiscal year 2009 began on September 1, 2008 during Bush’s administration, reflecting his priorities. By the time Obama took office on January 20, 2009 the fiscal year was almost half over; he didn’t submit his first budget until February 26, 2009 and the fiscal year 2010 budget is really the first one that reflected his priorities.
Nutting assigned the bulk of fiscal year 2009 spending to Bush, an assumption that other analysts have questioned. Glenn Kessler of the Washington Post found that Nutting overstated his argument in various ways. But the PoliFact site of the Tampa Bay Times concluded that the Nutting column was essentially correct.
Aside from the political implications, the reason this debate is important is because there is a tendency for people to conflate spending, deficits and debt, as well as confusing rates of change with absolute levels.
The difference between fiscal years 2008 and 2009 is very significant because the economic crisis hit hard late in calendar year 2008 and early 2009 – just as Bush was leaving office and Obama was coming in. According to the Congressional Budget Office, spending shot up from 20.7 percent of the gross domestic product in fiscal year 2008 to 25 percent in 2009 – an extraordinarily large increase.
When looking at the rate of change of spending, the base year is critically important; the higher spending is in the base year, the smaller subsequent increases will appear. If the base year is lower, subsequent increases will be larger in percentage terms.
Thus if we compare CBO’s latest estimate for spending in 2012 to 2008 we get a total increase of 21.7 percent, but if we compare it to 2009 the increase is just 3.1 percent.
I don’t want to get into the nitty-gritty of whether to allocate all spending in fiscal year 2009 to Bush or Obama. I just want to note that the president has very little control over the budget one way or another; the vast bulk of spending is baked in the cake the day he takes office and changes can only be made incrementally and over time.