November 6, 2013
Sergeant Friday Questions a Treasury Spokeswoman
– Just the Facts, Ma’am
Sergeant Friday: What has been the
behavior of total federal outlays in
the past five fiscal years?
Treasury Spokeswoman: As shown in Chart 1, the
year-over-year change in federal outlays ballooned to 17.9% in FY 2009 because
of the sharp increase in income security expenditures (e.g., unemployment
insurance benefits, food stamps) due to the most severe recession since the
early 1930s, TARP expenditures to recapitalize our financial system and a
fiscal stimulus program.
Sergeant Friday: Just the facts, ma’am.
I did not ask you why total federal
outlays ballooned in FY 2009.
Treasury Spokeswoman: Okay. In three of the
subsequent four years following FY 2009, total federal outlays contracted,
by 1.7%, 1.8% and 2.3% in FY years 2010, 2012 and 2013, respectively.
Chart 1
Sergeant Friday: Prior to this recent
experience, when was the last time total federal outlays contracted and by what
percentage?
Treasury Spokeswoman: 1965, by 0.25%.
Sergeant Friday: And before that?
Treasury Spokesperson: 1954 and 1955, by 6.9%
and 3.4%, respectively.
Sergeant Friday: In the five fiscal
years ended 2013, what was the compound annualized rate of growth in total
federal outlays?
Treasury Spokeswoman: Even with the
ballooning in FY 2009 outlays, the compound annualized growth in total federal
outlays in the past five years has been
just 3.0%, rounded to the first decimal place.
Sergeant Friday: Again, please no
editorializing. Just the facts, ma’am. How do the most recent fiscal years
compare with the past 60 years?
Treasury Spokeswoman: The data are shown in
Chart 2, starting with the compound annualized growth in total federal outlays
in the five years ended 1954. The median five-year annualized growth rate over
this 60-year period was 6.6%. Previous to the five years ended 2013, the last
time the annualized growth in total federal outlays was as low as 3.0% was in
the five years ended 1997. To find five-year compound annual growth in total
federal outlays as low as 3.0% or less prior to 1997, you would have to go all
the way back to the five years ended 1957 and 1958, with annualized growth
rates of 2.5% and 1.6%, respectively.
Chart 2
Sergeant Friday: Given the sharp
deceleration in growth of total federal outlays in the past five fiscal years,
I would assume that there has been a corresponding sharp deceleration in the
growth of total federal debt. Right?
Treasury Spokeswoman: There has been a
deceleration in the growth of total federal debt in the past five years, but,
forgive me for editorializing, I would hardly describe the deceleration as
“sharp”.
Sergeant Friday: I’ll be the judge of
what constitutes a sharp deceleration. Just give me the facts, ma’am.
Treasury Spokeswoman: Okay. Chart 3 shows the
five-year compound annualized rate of growth in total federal debt for the
years 1954 through 2013. I have included in the chart the five-year compound
annualized growth in total federal outlays for purposes of comparison. In the
five years ended FY 2013, total federal debt grew at a compound annualized rate
of 10.8%, down from 12.3% in the five years ended FY 2012. Someone as
perceptive as you will notice that whilst (I worked at the UK Treasury before coming
to the U.S. Treasury) growth in total federal outlays reached a local peak in
the five years ended FY 2009, growth in total federal debt continued to rise
until FY 2013. A similar phenomenon occurred in the mid 1980s when growth in
total federal debt continued to move higher after
growth in total federal outlays had begun moving lower.
Chart 3
Sergeant Friday: Interesting. Please add
in the five-year compound annualized growth (CAG) of total federal receipts to
what you have in Chart 3.
Treasury Spokesperson: (He really is a
perceptive fellow!) The blue line in Chart 4 shows the five-year compound
annualized growth rate of total federal receipts. In the five years ended FY
2013, total federal receipts grew at a compound annualized rate of just 1.9%. After peaking at a compound
annualized growth rate of 15.0% in the five years ended 1981, growth in total
federal outlays has been oscillating lower. In the 12 fiscal years from 2002
through 2013, on only two occasions, 2007 and 2008, was the five-year compound
annualized growth in total federal revenues greater than that of total federal
outlays. In only one of those years was the five-year compound annualized
growth in total revenues, at 7.2%, higher than the 1954 – 2013 median growth
rate of 7.1%. From 2002 through 2013, on only one occasion was the five-year
compound annualized growth in total federal outlays, at 8.9%, higher than the
1954 – 2013 median growth rate of 7.7%.
Chart 4
Sergeant Friday: Thank you for your
factual information. You may leave now.
Treasury Spokeswoman: I’m here to serve the
public. I’ll be on my way now.
Sergeant Friday: The word on the street
is that Washington has a spending problem.
If the “spending problem” reference is to the growth in federal spending, the word on the street must be an opinion. The facts don’t support this
opinion. In three of the past four fiscal years, total federal spending has contracted. In the five years ended FY
2013, the compound annualized rate of growth in total federal spending was
3.0%, 470 basis points below the
five-year annualized median growth rate over the past 60 years.
The
word on the street is that Washington has a federal
debt problem. The facts do
support the notion that growth in the federal debt is relatively high by
historical standards. But the facts also
show that the relatively high rate of growth in the federal debt in the past
five years is due to the historically low
rate of growth in total federal
receipts. In the five years ended FY 2013, the compound annualized rate of
growth in total federal receipts was 1.9%, 520 basis points below the five-year annualized median
growth over the past 60 years.
Having
reviewed the Treasury spokeswoman’s data, I am reminded of Daniel Patrick
Moynihan’s comment that everyone is entitled to his own opinion, but not his
own facts.
Paul
L. Kasriel
Econtrarian,
LLC
1-920-818-0236
If you look at a chart of actual outlays, instead of their growth rate, this fact check seems insignificant. http://research.stlouisfed.org/fred2/series/FYONET/
ReplyDeleteYes, back in 1901, total federal outlays were only $525 million compared with $3.0 trillion in 2008 and $3.5 trillion in 2013. So, by all means, let us not take note that in the 107 years ended 2008, total federal outlays grew at a compound annual rate of 8.4% only to slow to a compound annual rate of 3.0% in the five years ended 2013. Perhaps Mr. Gercke would recommend that total federal outlays should have been pared in the past five years to in order to get back to their 1901 level at the end of 2013.
DeletePaul Kasriel
yes, from 2 trillion just 10 years ago to 3.5 now, or 75% more belies the argument. which thus also illustrates the flat uselessness of the whole "you are entitled to your own opinion but not your own facts" meme. Characterization of the facts is a powerful influence on the state of the facts.
ReplyDeleteAccording to Treasury Dept. facts, the point-to-point simple (not annualized) percent change in total federal outlays in the 10 years ended 2013 was 59.9%, not 75%. 59.9% over a 10-year period is the equivalent of 4.8% on a compound annualized basis, the manner in which I presented multi-year percentage changes. I chose to present my changes in the form of compound annualized growth rates because I had also presented some year-over-year percentage changes and I wanted all of my percentage changes on the same basis -- annualized.
ReplyDeleteNow, let's put your 59.9% into some historical perspectives. In the 10 years ended 2003, the point-to-point simple percentage change was "only" 53.3%. Using 10-year point-to-point simple percentage changes, starting with the 10 years ended 1911 through the 10 years ended 2013, the median change was 115.1%. So yes, the 59.9% point-to-point percentage change in total federal outlays in the 10 years ended 2013 was "big", but it was only 52% of the long-run median percentage change.
Now, I do not know why you chose to look at a 10 year period. But the reason I chose to examine a five-year period is because a certain grass-roots political movement that alleged that federal government spending was out of control emerged in 2009-2010. In the five years ended 2013, the point-to-point simple percentage change in total federal outlays was 15.8%. To put this in perspective, in the five years ended 2008, the point-to-point simple percentage change in total federal outlays was 38.1%. From the five years ended 1906 through the five years ended 2013, the median point-to-point simple percentage change in total federal outlays was 37.6%. My question to this grass-roots political movement is what took it so long to get enraged in the federal government's largesse? Where was the outrage in 2008?
These are the facts, Mr. Bergerson. You are certainly entitled to your opinion about them.
Paul Kasriel
Once again, a very informative post. Thanks for sharing!
ReplyDelete- JO from KW Business Insurance in Medford