Diary

Should spending be tied to GDP?

I cringe every time I hear conservatives arguing that federal spending should be tied to GDP. First off, it is terrible messaging, tying as it does one nebulous concept (who can fathom what 2 trillion dollars means) to another another equally nebulous concept, GDP.

More importantly, it is terrible policy. In framing  the  argument this way, we give credence to the notion that government spending should be constrained only by economic growth. Is that the message we want to send?  Do we really want to say that if the economy grows, government should grow as well?

A far better metric is per capita spending, currently about $12,500 per person per year. That’s a number people can grasp and ties federal spending to the population it serves. It is also  more than three times the rate (adjusted for inflation) it was in 1980 which speaks volumes about the value we are getting for our tax dollar.

We need to drive home Friedman’s thesis that the true rate of taxation is the rate of government spending and the fact that we are using one credit card to pay off another makes the debt harder not easier to manage. In per capita terms, it means that currently government spending (taxation) per family  is 104% of the median family income and is forecast to increase sharply as the baby boomers retire.

In politics, messaging is everything. We need to make sure we’re speaking in a language the average American can relate to.