Saturday, October 10, 2015

My (Indirect) Dialogue With Kevin Williamson

A couple of days ago, Williamson posted the following on NR's blog site, The Corner :

In 1957, the nation was more or less at peace, the budget ran a small surplus, and we spent 9.8 percent of GDP on national defense. That was down sharply from the years immediately before (winding down of Korean War expenses, I guess) but quite a bit higher than it was in 1950 and 1951. In 1950, we spent only 4.9 percent of GDP on national defense, half that 1957 number.

This year, we’re going to spend about 3.3 percent of GDP on national defense. That’s less than we spent during the first Clinton administration, a fairly peaceable time. It’s less than we’ve spent since before the budgetary beginning of the post-9/11 era, by which I mean, since 2002.

Looking at 1957 from the other side of the ledger, tax receipts were 17.2 percent of GDP. This year, taxes are expected to come in at 17.7 percent of GDP, a little bit more.

I like 1957. It seems like a pretty good year to me, and its neighbors on the calendar were pretty good years, too.

My lefty friends sometimes say that Republicans should endorse those high Eisenhower-era personal income tax rates, but in fact the government took in slightly less in taxes then than it does now. Not many people paid those sky-rate 1950s tax rates on much of their money. Certainly not Ike—he had his million-dollar book deal structured as a capital gain. The 1957 story isn’t about the taxes.

It’s about the spending.

The real lesson of 1957 is that you could—if you were so inclined—spend three times what we spend on the military in GDP terms, produce a small budget surplus, and reduce total taxes. You could do that if you were willing to do the work on the rest of the budget.

To which I commented on the NR site --

Cmon Kevin. Of course we could spend one tenth of GDP on defense in 1957 without running a deficit. We didn't have the welfare state.

Today, KW wrote --

Interest on the debt today is almost exactly the same as it was in 1957; it is exactly the same as what it was in 1953: 1.3 percent of GDP. In 1957, we spent 1 percent of GDP on physical resources; today, we spend a bit less, 0.8 percent of GDP. Other functions constituted 1.6 percent of GDP in 1957, today down to 1.1 percent of GDP. Undistributed receipts is nearly unchanged, up 0.1 percent of GDP.

That leaves us with the welfare category, the only area of federal spending that has grown significantly relative to the size of the U.S. economy. In 1957, it was 3.9 percent of GDP—not insignificant, to be sure; that’s a slightly larger figure than our present-day military spending. But welfare entitlement spending in 2015 is 15.2 percent of GDP. Which is to say, broadly defined welfare spending alone is equal to 86 percent of all the federal taxes that are going to be collected this year. Most of that is Social Security, health-care spending, traditional welfare, and federal education spending, which has grown substantially despite the fact that most education spending happens at the state and local level.

Recap: In GDP terms, we spend about a third on the military today compared to what we spent in the late 1950s. We spend almost exactly the same on interest on the debt. We spend 20 percent less on energy, transportation, the environment, and natural resources. And we spend almost four times as much on welfare. Again, that is in GDP terms, and our economy is a heck of a lot bigger than it was in 1957. As a share of all federal spending, welfare has gone from 23 percent of spending to 73 percent of federal spending. In constant-dollar terms, we spend 17.5 times as much. In nominal-dollar terms, we spend 150 times as much.

We could probably stand to trim the Pentagon budget a bit and reform defense procurement. But the real problem is the welfare state. The numbers don’t lie.

As I was saying...

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