By Mark Fernald
Washington is trapped in an endless fiscal debate. Republicans argue that the Federal government is too big. Democrats argue that revenues are too low. The fight is over money, but the larger debate is over the size and scope of the government.
Before we line up on one side or the other, we should look at recent history.Over the past forty years, federal spending has averaged a little over 20% of Gross Domestic Product (GDP).
When the economy has been strong, federal spending as a percentage of GDP has dipped below 20%. When the economy has been weaker, that figure has been several points higher.During the same forty years, federal revenues have averaged about 18% of GDP. As a result, the federal government was in deficit for all but three of those years.
This fluctuation is to be expected. When times are tough, spending increases for safety net programs, such as Medicaid, food stamps, and unemployment benefits. The opposite happens when the economy booms, such as in the 1990s. Continue reading