Federal Outlays Per Person vs. Percent of GDP

The conventional methodology to gauge the size of federal spending is to measure it as a percentage of GDP. However, since per capita GDP has grown faster than the population, this methodology tends to mask the extent to which the federal government has ballooned.

For example, the following lists federal spending per person in current dollars in various years:

1960: $7,625
1990: $8,635
2010: $11,442

In other words, our federal government is spending 44% more per person today than they did in 1960, but are we 1.5x better off? Or, if we use 1990 as a basis for comparison, do we feel like we are 1.4x better off today than we were in 1990?

In both cases, the answer is that while improvements in general health and welfare have occurred over this period the magnitude of that improvement is no where near as great as the increase in the government spending.

Currently, the U.S. Government spends over $3.5 trillion per year (over 40% of which it has to borrow, by the way). If our government had capped spending to the 1960 per capita level, current spending would be $2.4 trillion, or 70% of the current spend. Capped at the 1990 level, current spending would be about $2.7 trillion, or less than 80% of current levels. By either measure, it is clear that federal government spending has gotten out of control in recent years.

Therefore, I argue that we should create budgets that are based on per capita spending and target a level significantly lower than the current rate of spending.

Why is per capita spending preferable as a unit of measure to percentage of GDP calculations? For one, the government exists to serve its citizens and if its growth outstrips population growth it starts to beg the question as to why must our government consume so many resources in order to provide a basic service. Secondly, population growth is generally much slower than GDP growth, so generating budgets that track population growth will help cap spending. Thirdly, when productivity is high (i.e. GDP is growing faster than the size of the workforce) we should be running fiscal budget surpluses and reducing the national debt; if government spending rises in lockstep with GDP growth the goal of debt reduction will never be achieved.

Finally, I believe that there is an issue of fairness and constitutionality at play here. The Constitution clearly lays out limits to the role of the federal government, and I don't think that it is right or fair for the federal government to expand beyond the point that is absolutely necessary, especially when measured by how much it spends to provide its services to each and every citizen. In the most basic sense, we as citizens should be getting our money's worth.

I, for one, don't want my government to spend a nickel more on me than it absolutely has to.