RSSU.S. Government Spending as a Percentage of Gross Domestic Product 1980 - 2007
When the government spent $591 billion in 1980, GDP stood at $2.79 trillion. Dividing $591 billion by $2.79 trillion equals 21.6%. In 2007 when spending totaled $2.73 trillion, GDP was $13.67 trillion. Therefore, spending totaled only 19.9% of GDP for the year. Said another way, the government consumed 21.6% and 19.9% of the goods and services produced within the nation in 1980 and 2007, respectively. For the past 28 years the government’s share of GDP has fluctuated in a narrow 5% range, with a high of 23.5% in 1983 and a low of 18.4% in 2000. Over the 28-year period shown in the chart, the federal government has consumed an average of 20.9% of the goods and services produced in the United States.
4 Responses to “U.S. Government Spending as a Percentage of Gross Domestic Product 1980 - 2007”
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June 19th, 2008 at 3:50 pm
This chart helps clarify federal spending without inflation being such an issue.
But this chart is troubling to me because so much of the U.S. economy’s calulated GDP is different today than it was 20 or 30 years ago. Our textile and manufacturing sectors have been sharply reduced; mining operations in the United States have largely been closed and domestic steel and aluminum production is a fraction what it used to be. U.S. industry produces far far fewer durable goods that it used to, as a percentage of GDP. So how coule our Gross Domestic PRODUCT have INCREASED, when the actual PRODUCTION of PRODUCTS that have LASTING ECONOMIC VALUE has DECREASED? Well, they add in all sorts of non-productive services as if they were products. And that gives us a very misleading figure.
When a bank charges you interest or fees in relation to your banking transcations and credit abnd debit cards, what did the bank produce? Nothing. What new wealth was created? None. What lasting value was added to our economy? Zero. But that income the banks recieve is chalked up as revenue and added to the GDP. Most service sector jobs are the same way… services that don’t produce anything, don’t add value to product, and have no lasting value are added to the GDP figure. Let’s look at perhaps the most simple example: You walk in to a casino with $10 in your pocket. You walk out with $2 in your pocket. The casino “made” $8, which the economists add to the GDP. But did the economy grow? Was anything produced? Did anyone really make money? No, no and no. Cash just changed hands. For every dollar taken in by a casino (or bank or most other service providers) there is one less dollar in someone elses pocket. The whole economy experienced no growth just because the casino, bank or most other service providors have more money in their pockets. But this is the trend.
As real production in the U.S. continues to decline, more and more of the U.S. economy is driven by non-productive service sectors. The even more alarming reality is that all of these non-productive services (which do not even add value to any product or produce anything of lasting economic value) conume resources in the process (they consume energy, fuel, wear and tear on our infrastructure and all sorts of consumable good–all without producing anything! And while the “income” they put in their pockets is counted up and added to the GDP, they actually produced nothing and consumed resources in the process, which actuall causes our overall economy to shrink!!! It is physically imposible for any non-productive service secotor to create any economic growth. IT IS PHYSICALLY IMPOSSIBLE.
For real economic growth to occur, some product of lasting economic value must be created, and the value of that product must be more than all the resources that were consumed. This is not taken into account with the way GDP is calulated. THINK ABOUT THIS: We could shut down all of our farms, ranches, all of our lumber mills and manufacturing plants, all of our factories and machine shops (essentially stop all productive activity), and someone with deep pockets or huge credit could hire all those now-idle people to stand on their heads and whistle Dixie as tourist attractions, and for this service they’d be daid double what their income was before. OK, the way the GDP is calulated now, the total of the money these folks were paid for their non-productive services would indicate that our overall economy activity was DOUBLE what it was before. Even though NOTHING of ANY value was produced. But that’s the way our total DGP is calculated. It is not a reliable figure to use to try to see if our economy actually grew.
And so comparing U.S. Federal spending to the calculated GDP really doesn’t give us any idea what the ACTUAL ratio is between what our government spends and what our collective economy REALLY PRODUCES.
June 21st, 2008 at 5:04 pm
The previous comment is right on. The GDP calculation and percentages of deficit spending versus GDP etc. is another Government deception practice. It totally hides what is really happening. The U.S. GDP is comprised of 70% (China’s GDP spending is more in the under 50% arena) spending which says it all - we are spending (and borrowing) much more than we are producing and saving. It hides the pertinent facts of absolute durable goods production numbers versus what is being spent - which is what Government desires because it’s pretty scary to face the real facts. Our manufacturing is continually decreasing in terms of jobs and real output because of “so called” free trade and government regulation and we are becoming poorer by the day as a nation.
We are at the point where our economy can only function with more and more borrowing and consuming. Of course this is an illusion and we are heading for a cliff.
September 23rd, 2008 at 9:49 am
With respect, the notion that our nation produces nothing when it produces a service instead of a tangible product is in error. In the casino example given, the $8.00 was actual revenue to the casino–a portion of which paid salaries and taxes.
Just because the casino’s account was credited while the gambler’s account was debited does not nullify the transaction becasue ALL transactions involve such debits and credits.
What lasting economic value is there when an aluminum can is manufactured but which ends up in a ditch beside the road or is hidden in a corner of your garage?
When its eventual means of “disposal” is considered, what is the lasting economic value of beef production?
Education is a pure service. Is its value to the economy zero?
How about health care?
Sorry, but the notion that hard products have true economic value and services do not is simply unsupportable.
October 8th, 2008 at 11:35 pm
I have to agree with nicksheedy and take exception to av84fun’s comment. I believe that education and health care are actually parts of overhead needed to maintain a productive society. I do believe that they have extreme value, but they do not directly support production.
For example, if you educate people but have no jobs for them to utilize what they have learned, then the expense of the education is a negative. Or if you insure that people are healthy and able to work, but there are no productive jobs, then you have healthy people who can not contribute.
What we need in this country is leading edge technology that can be productized and globally distributed. For example, research being done at Auburn University in Alabama and the University of Nebraska on switchgrass has major potential for reducing our dependency on foreign and domestic crude oil. Technologies spawned out of this research should be embraced.