In yesterday’s Wall Street Journal, Austan Goolsbee argues that Washington Isn’t Spending Too Much. “It’s completely normal,” he says “that spending rises during big downturns….As the economy grows back to health, the government share of the economy will fall,” making it seem as if the Administration’s plan all along was to bring the federal spending share back to what it was before the recession started. It wasn’t.
Take a look at this chart. The top line shows the federal spending share with the budget plan submitted by the Administration last February when Austan Goosbee was Chairman of President’s Council of Economic Advisers. It makes no attempt to bring spending back to pre-recession levels as a share of the economy. While the Congress was able to make a dent in the Administration’s spending plan, we still have a long way to go to gradually get spending back to 2007 levels, which is the pro-growth thing to do, as I explain in First Principles, out later this month.