In his Monday “Hey Small Spender” column, New York Times columnist Paul Krugman bizarrely denied that federal spending has significantly expanded over the past two years. He asserted that “[t]here never was a big expansion of government spending” and “the big government expansion everyone talks about never happened.”
Yet for his talk about a “fact-free” disinformation campaign, Krugman curiously provides no data on total federal spending. This may be because all official budget data reveals a different story. According to President Obama’s own Office of Management and Budget—the keepers of the official data on government spending—federal spending has just finished its largest two-year surge in nearly 60 years, leaping from 20.7 percent of the economy to 25.4 percent (see Table 1.2 here), the highest spending level in American history outside of World War II.
Overall, Washington is spending 23 percent more today than it did two years ago. Quite a stunning increase given the concern about deficits and fiscal austerity other nations are embarking on. The Congressional Budget Office and Treasury Department show similar figures. So where are the facts, one wonders, to support Krugman’s claim that the federal government has not significantly expanded?
Krugman’s argument starts by stating that most spending increases have been concentrated in social spending and financial bailouts, rather than government employment, direct government purchases, or the creation of many new government programs. This is a non-sequitur. The composition of a federal spending increase—whether it goes towards Medicaid, direct purchases of fighter jets, state bailouts, new federal employees, or new government programs—isn’t the same as how much federal spending has increased.
The broader purpose of Krugman’s column is to rehabilitate the outdated myth that government can spend its way to job growth and prosperity. Washington’s massive spending spree has, by any objective standard, failed to create jobs. So Krugman simply denies that this spending ever happened, despite reams of official evidence to the contrary. Furthermore, the type of spending that Krugman concedes jumped—unemployment and social spending—is among the most stimulative according to his Keynesian economic theories, yet the unemployment has not even responded minimally. This spending’s complete failure to create jobs should provide one more nail in the Keynesian coffin.
Krugman can argue that the historic surge of spending and deficits since 2008 is too small for his taste. But his claim that “[t]here never was a big expansion of government spending” just doesn’t add up.
UPDATE: Here are a few points to address some of the more prevalent responses we’ve seen in the comments section:
1) Some have stated declining GDP explains the entire rise in federal spending as a percent of GDP. Table 1.1 of the OMB Historical Tables says otherwise:
2008 spending – $2,983 billion
2010 spending – $3,720 billion.
2) Others assert that federal spending hikes merely offset state & local spending cuts. However, *total* spending has leaped. OMB is the official scorekeeper, and Table 15.2 of the Historical Tables shows a 10% increase in 2009 alone. And indications are that it increased again in 2010. Perhaps a 10% increase isn’t enough for Paul Krugman, but its a healthy increase to most people.
3) Some of Krugman’s defenders are using a bait and switch. He wrote “[there never was a big expansion of government spending” and “the big government expansion everyone talks about never happened.”
Now his defenders say that Krugman merely said *stimulus* spending didn’t increase enough. While the body of his op-ed made some of those distinctions, his summary argument — again, quoted above — asserted that *total* government spending didn’t grow significantly. That is demonstrably false.