Obama's spending

“As soon as I took office, I asked this Congress to send me a recovery plan by President’s Day… Not because I believe in bigger government — I don’t. Not because I’m not mindful of the massive debt we’ve inherited — I am.”

–President Obama to congressional joint session, February 24

Cato:

President Obama said some encouraging words about federal spending in his first major speech as president, but the budget released by his administration today reveals a substantial disconnect between his rhetoric and his policy.

Apart from defense, federal spending has hovered around 16.5 percent of the economy since 1980, through both Democratic and Republican administrations. But under President Obama, nondefense spending is soaring to 23 percent of the economy this year and will remain at historic high levels in the future.

Even after current stimulus spending is supposed to end, nondefense spending is expected to be more than 19 percent of the economy — or 25 percent more than the size of government during the later Clinton years.

Americans need to decide whether they want the European-sized government that President Obama is promising — with all its damaging effects on individual freedom and economic growth — or whether they want to return to the greater prosperity of the smaller-government Clinton years

Here Cato has adopted the typical Republican line that domestic and military spending should always be considered separately. And this is so that Republicans can argue that their high defense spending is a good idea. But why does Cato do this here? I don't know what it will be in GDP terms, but the budget Obama proposed today seeks to reduce defense spending by $1 trillion over the next 10 years.

The chart above shows a roughly 2.5% of GDP increase in non-defense domestic spending, not counting the stimulus peak. Like Cato I think this post-recovery increase is a bad idea and prefer the nice dip Clinton left us with in 2000 -- before Bush came in and ruined it.

But let's bear in mind the military spending that Obama is decreasing, which compensates for part of his other domestic increase.

Still, the picture doesn't look pretty. Andrew gathered reactions and has a post on how it will be payed for. Megan has an interesting post on "big bath accounting".