If it weren't for the extraordinary expenditures the U.S. federal government has undertaken in recent years, such as for the wars in Iraq and Afghanistan, as well as the various bailouts and economic stimulus spending initiatives, how much would it be spending? Better yet, how much would it be committed to spending at a minimum for each year from now through 2080?
Here at Political Calculations, we ask and answer questions like these and what's more, we build tools so you can too!
What we've done for our latest project is to take the Congressional Budget Office forecasts for the "extended baseline" growth of various "mandatory" spending items into the future as part of its most recent Long Term Fiscal Outlook, which considers such programs as Medicare, Medicaid, Social Security and the Net Interest payments that must be made each year on the U.S. National Debt, and combine that with the baseline spending given by various discretionary spending programs, such as highways and mass transit, farm subsidies, et cetera, as given by the White House's Office of Management and Budget historical tables for these kinds of expenditures in recent years.
We determined each as a percentage share of GDP for any given year from 2009 through 2080, which means we just need to project what GDP would be for each year from now through then! That was easy, since the Social Security Administration's OASDI Trustees had already done that exercise for us from 2009 through 2085 as part of their annual review of the long term health of Social Security's retirement benefits program!
The results of that project are now just a few clicks away....
Why Baseline Government Spending?
To be able to anticipate what impact a new spending initiative or a change in an existing expenditure will have, you have to compare it against some reference point, namely, the spending that would most likely have occurred if the government were left on auto-pilot. By determining what that level spending is, we now have a tool we can use as a base of reference against which we can measure the cost impact to U.S. taxpayers of the decisions implemented by the country's elected officials and bureaucrats.
About the Data Behind the Tool
For National Defense, we used the percentage share of GDP indicated by the Congressional Budget Office that would apply in 2019 as our baseline value of 3.4%, when the United States' currently active military operations will presumably have long-since concluded. Historically, this value ranges between 3.0% and 4.0% of GDP, but has been higher than this range in recent years due to the decisions taken by both the Bush and Obama administrations, most notably to support significant military operations in both Iraq and Afghanistan.
Otherwise, we calculated the baseline percentage share of GDP for each budgetary line item provided in the OMB's Budget of the United States Government Fiscal Year 2010 Historical Tables 3.2 for 2007, since this year precedes the economic crises of 2008 and would be considered to be representative of a relatively typical level of spending in a non-economic crisis political environment. We noted that the majority of line-items listed in the tables were stable as a percentage of annual GDP from year to year.
We modeled the change in expenditures over time for the Medicaid, Medicare, Social Security and Net Interest mandatory spending line items in the U.S. federal government's budget using the data provided by the CBO in its Long-Term Budget Outlook, which it released in June 2009.
The projections for future GDP were modeled from data provided by in the Social Security Administration's 2009 OASDI Trustees Report, specifically from the Trustee's intermediate cost assumptions presented in Table VI.F6. - Selected Economic Variables, Calendar Years 2008-85. The OASDI Trustees describe their assumptions in Section 5 of the report.
Labels: economics, forecasting, gdp, politics
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
Thanks in advance!
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